We recently published a list of 12 Best Brewery Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Constellation Brands, Inc. (NYSE:STZ) stands against other best brewery stocks to buy according to hedge funds.
The global alcohol industry is currently grappling with strict regulations, high taxes, inflation, and rising costs, which are likely to persist and may squeeze the profit margins of alcohol producers. The global brewing industry had been hit particularly hard as beer production worldwide fell to 1.88 billion hectoliters last year, representing a YoY decline of 0.9 %.
Peter Hintermeier, Managing Director of BarthHaas, commented:
“After we had managed to post modest growth in 2022 despite unfavorable conditions, we were expecting another small increase in 2023. However, energy, raw materials, packaging, logistics, and labor costs remained at a high level, which put pressure on the brewing business in many countries.”
READ ALSO: 10 Best Marijuana Stocks to Buy According to Hedge Funds
The American brewing industry is also faced with a declining demand, as beer consumption in the US last year fell to its lowest level since the 1970s, according to the Brewers’ Association. In fact, in 2022, the American spirits industry surpassed beer in revenue for the first time ever. The trend then continued in 2023, driven primarily by the spirits RTD category. Nevertheless, the country’s major brewers were still in good financial health, thanks to rising prices and a consumer shift towards more expensive, often imported beers.
A major factor behind the decreasing demand is also global drinking habits have shifted dramatically over the last few years. The modern consumers are increasingly focused on health and wellness and seek alternatives to traditional alcoholic beverages, giving rise to the rapidly growing low and no-alcohol trend. To make sure they don’t miss out on the opportunity, several industry behemoths have hopped on the zero-alcohol bandwagon and are now offering products with all of the taste and none of the booze.
Despite the aforementioned challenges, the alcohol sector can be an attractive option for investors looking to diversify their portfolios, simply because of the buffer it provides during tough economic times. An analysis by Goldman Sachs has revealed that beer and spirits volumes in the American market have shown little correlation with economic growth. Their sales are more related to the general trends of alcohol consumption per capita rather than the general state of the economy. This is because beer and spirits are often seen as affordable luxuries or even staples.
According to a study by Cambridge University, the decreasing levels of average per capita income lead to very small changes in gross alcohol, wine, and beer consumption. In fact, the surge in unemployment during recessions could instead trigger an increase in the average alcohol intake.
A great example of this is how Americans drank more alcohol during the pandemic and this was also reflected in the resultant imposts collected by the national kitty. Alcohol tax revenues collected by the U.S. Treasury Department rose by 8% in the fiscal year that ended on Sept. 30, 2021, compared to the previous year, and remained well above pre-pandemic levels.
Another popular investment vehicle in the alcohol industry is rare whiskeys. Aptly named ‘Liquid Gold’, this beloved liquor can preserve and even increase in value during economic instabilities, inflationary periods, and recessions. One simply cannot forget about the bottle of The Emerald Isle Collection that sold in auction earlier this year for $2.8 million, or the 1975 cask of Ardbeg single malt which was acquired by a private collector in Asia in 2022 for over $20 million, more than double the amount Glenmorangie paid for the entire Ardbeg distillery and all its stock in 1997.
The Rare Whisky 101 Apex 1000 Index tracks whiskeys that are highly sought after for collection. It has gained over 384% since 2013, against almost 301% gains by S&P’s famous benchmark of the top 500 companies for the same period. The RW Japanese 100 Index, which includes 100 collector’s bottles from Japan, has seen gains of around 350% since 2015. The index includes bottles like Ichiro’s Malt ‘Card’ Ace of Spades, Ace of Diamonds, and King of Hearts, among others.
Methodology
To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 12 companies operating in the brewing sector with the highest number of hedge fund investors. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Beer Alcohol Stocks Held by the Most Hedge Funds.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A winemaker examining a glass of red wine from a barrel in a cellar.
Constellation Brands, Inc. (NYSE:STZ)
Number of Hedge Fund Holders: 36
Constellation Brands, Inc. (NYSE:STZ) is involved in the production, import, marketing, and sale of beer, wine, and spirits across the United States, Canada, Mexico, New Zealand, and Italy. The company made headlines last summer when its Mexican beer brand, Modelo Especial, became the Best-Selling Beer in America after dethroning Bud Light.
Constellation Brands, Inc. (NYSE:STZ)’s beer business continues to flourish and in Q2 2025, its beer segment (responsible for raking in the lion’s share of its revenue) continued to deliver strong financial performance with net sales and operating income growth of nearly 6% and 13%, respectively. Its core brands continued their growth during the quarter as Modelo Especial grew by 11%, while Pacifico surged by 21%. In addition to the sales uptick, the beer segment has also been witnessing a consistent improvement in margin expansion, highlighting the company’s ability to drive profitability alongside volume growth.
Another factor favoring Constellation Brands, Inc. (NYSE:STZ) is that America’s Hispanic population (a segment that makes up over 50% of the company’s client mix) is growing almost twice as fast as its general population, so brands like Modelo, Pacifico, and Corona are expected to stay in high demand.
The wine and spirits segment of Constellation Brands, Inc. (NYSE:STZ) continues to suffer and saw its net sales decline by 12% during the second quarter. Though it only accounts for less than 10% of overall earnings, the company recently wrote down the value of its wine and spirits business, taking a $2.5 billion charge. It was announced earlier this month that Constellation will sell its Svedka vodka to Sazerac, as the Corona maker looks to focus on premiumizing its wine and spirits portfolio.
Since its core beer brands come from across the southern border, Donald Trump’s 25% tariff on imports from Mexico could pose a serious threat to the continued growth of Constellation Brands, Inc. (NYSE:STZ). Hence, the company is making sure it has adequate inventory in place here before the President-elect takes office. It is also assessing cutting costs elsewhere to absorb the tariffs, or incrementally raising its prices, but that will come with its risks.
Overall, STZ ranks 2nd on our list of best brewery stocks to buy according to hedge funds. While we acknowledge the potential for STZ to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than STZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.