How to Invest in Alcoholic Beverage Stocks


Are you looking for a safe place to invest during rough times? You might want to consider taking refuge in the bottle -- alcoholic beverage stocks. Alcohol is actually a staple item. People consume it during good times and bad (maybe even a little more during the bad). According to multiple sources, worldwide sales of alcoholic beverages (which include beer, cider, wine, and liquor) are over $900 billion, and increasing between 1 and 2 percent per year. That may not sound like much, but it is a stable industry with steady, even rising, profits. The leading company, without question, is Anheuser-Busch, now a Belgian company. Another major player is SABMiller, owner of the Miller beer products. However, there are many more companies to consider for investment.

  • Learn a little about the industry. Using a website like the free version of Hoover's, or a premium database through your local library such as NetAdvantage, Business & Company Resource Center, Value Line, or the paid version of Hoover's, read up on the alcoholic beverage industry and make a list of possible candidates for your investment.

  • Obtain the most recent annual report for each company on your list. Look on each company's website, usually under a tab labeled "Investors".

  • In the income (or profit & loss) statement included in the report, look for signs of sales growth throughout a calendar year, not just over one quarter. Sales of alcohol are affected by the calendar (think about the Super Bowl, for example), so you want to make sure you're looking at the proper time period.

  • Find and compare the gross profit margins among your companies.

  • Look for trends in the net profit margin. This is the net income divided by net sales. In alcoholic beverages, it is important to find upward trends over a period of a few years, in order to see real trends.

  • Compare P/E ratios of your companies. This is the ratio of stock price to the earnings per share. You can find P/E ratios on many websites, including Google Finance. Alcoholic beverage companies tend to have lower than average P/E ratios.

  • Examine balance sheet ratios, such as the current ratio, across companies, and look for indications that the company is doing well turning over inventory. Excess inventory is bad news for companies in this industry.

  • Make your choices, and buy your stocks!

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