Editor’s note: This article was first published in April 2013. The stock picks for 2013, 12-month returns, dividend yields and S&P 500 “record highs” are from that month. Beam was acquired by Suntory in 2014, and company descriptions may have changed.
Relax. We’re not going to recommend having a few drinks before investing, since alcohol is not a good idea when making decisions, but it may be a very good idea to put alcohol into your investment portfolio. Over at CNBC they are raising a toast to 5 stocks for 2013.
While the S&P 500 has managed to hit record highs, there are five stocks that have done far better than the index. Vices are very profitable on the stock market. What’s more, according to analysts, dividends could be even more generous in food, beverage and tobacco stocks, although today we are focusing exclusively on liquor companies, because of the strong returns they have achieved and their prospects of continuing to grow in 2013.
Alcoholic beverage stocks are known for being defensive when times get tough. We would sum it up by saying that people drink when times are good, and when bad times come, they keep drinking. These are the 5 most profitable stocks in the liquor sector:
1. Boston Beer
This company holds only 1% of the US beer market, but that small share is more than enough to make it the fourth-largest brewer in the country. What sets it apart is that it is the largest maker of “craft” beer and, so far, it has kept gaining market share. On top of that, the company has an almost debt-free balance sheet.
Over the last 12 months, its shares have risen 71%.
2. Molson Coors
It is one of the largest brewing companies in the world, with a strong presence in the US and well established in Canada, the UK and Europe. Although its stock has performed somewhat modestly over the past year (it is up 25%), analysts advise investors to keep a close eye on it because of its strong prospects. Worth researching.
3. Beam
This spirits maker is known for its Jim Beam brand, and it is also gaining visibility with other brands of whiskey, bourbon, tequila, vodka and more. According to analysts, Beam is well placed to take advantage of the growing consumption of these spirits, and they say that at current prices the company is attractive. However, looking at the company’s chart, although it has broken through a short-term resistance level, it would need to get past two stronger resistance levels; if it manages to, it could rise more than 50%. Of course, it might not manage it. On the fundamentals, the company is trying to reduce its debt and pays a dividend of only 1.4%, although analysts say investors who stick with the stock will be rewarded for their patience. It has gained 13% over the last 12 months.
4. Diageo
Based in London, Diageo has one of the most diversified (and attractive) portfolios of beer, wine and spirits, with premium names including Smirnoff, Johnnie Walker, Captain Morgan and Guinness (many of you will know these brands). It is the largest producer of alcoholic beverages in the world, and its market-leading position makes it the “other Coca-Cola”, only with alcohol.
5. Ambev
This company is the largest brewer in Latin America, with a profitable business in more than 14 countries, including Brazil and Argentina. It also owns Canada’s Labatt brand. It offers diversified exposure, ideal for investors who want international exposure in their portfolio of alcoholic beverage stocks. It currently pays a 4.5% dividend, and CNBC’s analysts expect the company to keep surprising with its strong track record.
Further reading
- 3 strange but profitable investments
- Warren Buffett’s 16 investing tips
- 5 steps to building a dividend investing strategy and earning 10%+
Featured image: Ken Thomas, Public domain, via Wikimedia Commons.
