Sin stocks are often thought of as being fairly resilient regardless of economic conditions. In the 2018 landscape, however, your choices have been somewhat narrowed. There has been a lot of consolidation in the market, especially in the case of brewers. (See also: 5 Tempting Sin Stocks.)
However, if you have a passion for the hoppy beverage and want to put your money where your mouth is, the final months of 2018 might be a great time to get a piece of these beer stocks. All figures are current as of Sept. 16, 2018. (See also: Beeronomics: Factors Affecting Your Pint.)
Although Constellation is perhaps best known for its portfolio of wine brands, its beers are also household names. Constellation handles popular Mexican brands like Corona and Modelo, and these are the beers that are currently fueling the company's sales.
According to Constellation's 2018 10-K , net income was up 51% over 2017, with beer sales up 10% compared with wine and spirits down 7%. At $212.05, Constellation's stock is trading at around 16 times earnings, and the stock price is up approximately 5% over the past 12 months. Even after its strong recent performance, the stock's average 12-month price target of $247.53 suggests upside of over 16% from current levels. Although the stock is not a pure beer play, it's tough to argue with Constellation's impressive beer-driven growth trajectory. The company also recently added another sinful substance to its portfolio by acquiring a stake in Canadian cannabis firm Canopy Growth Corporation (TWMJF). (For more, see: Will Constellation Brands Stock Break Out From Key Resistance?)
If you're looking for a pure beer play and major established brands, you can't overlook Anheuser-Busch InBev. In addition to the flagship Budweiser brand, Anheuser-Busch handles Natural Light, Stella Artois, Becks and Michelob, among others. And with its massive $100 billion merger with SABMiller, AB InBev is one of the largest brewing companies in the world.
After hitting highs above $126 in October 2017, the brewer's stock saw several months of declines. The stock has seen sharp declines in the second and third quarters of 2018, settling at current levels of $89.29. Even after the recent sell-off, this beer stock is not cheap, with a P/E ratio of about 22.33. AB InBev is a strong dividend payer, with a forward annual dividend yield of 5.30%. There is upside potential of more than 30% to the stock's average price target of $116.44, indicating that analysts expect the beer giant to recover from its recent declines. (See also: How Anheuser-Busch Makes Money.)
This is another all-beer, all-the-time stock that represents established brands, including Molson and Coors, of course, as well as Blue Moon, Keystone, Cobra and Sharp's. The company draws the bulk of its revenue from Canada, with the U.S., U.K. and Eastern Europe as its other major markets.
At a current price of $63.14, the stock trades at a P/E ratio of 8.68. The share price is down approximately 24% over the past 12 months. However, with an average price target of $76.64, there are expectations for a gain of around 21% over the next 12 months. According to its 10-K, Molson Coors' revenue and earnings ticked upward on a year-over-year basis and came in ahead of consensus estimates. (See also: Molson Coors: Legalized Pot May Hurt Beer Sales.)
If you're a beer drinker, you know that craft brew is a driving force behind beer's growing popularity over the past few years. The Craft Brew Alliance is an Oregon-based company that focuses on bringing American craft beer to market. Its portfolio includes the Kona, Red Hook, Widmer Brothers and Omission brands. It is definitely a smaller player, with 2017 revenue of just over $207 million.
Craft Brew Alliance shares soared by more than 17% in early November 2017 after the company issued a solid quarterly earnings report for the period that ended Sept. 30, 2017. As of Sept. 16, 2018, Craft Brew's stock is worth $17.75. The stock is trading at a P/E ratio of 24.32, reflecting strong growth expectations. (See also: Craft Beer Saw Double-Digit Growth in 2016.)
The Bottom Line
Beyond the frosty mug, you may be able to find a place for beer in your portfolio. While continued consolidation in the beverage market has limited the number of companies to choose from, the stocks on this list offer some growth potential to thirsty investors. (For additional reading, check out: AB InBev Explores Techniques to Brew Beer on Mars.)