Why booze stocks are so cheap (part 1002)

This analysis is provided by Eden Bradfeld at BlackBull Research—sign up for their Substack to receive the latest market insights straight to your inbox.

Now, I do not think Brown Forman will return to 32x earnings anytime soon — if ever — but if you even half the implied return from multiple expansion you still have plenty of upside.

Ditto Remy — I do not love Remy because Cognac, for lack of a better term, is screwed. But there’s still obviously value there and it trades on a very depressed multiple — what’s to say the family has had enough and finds a buyer?

Finally, Diageo. Less upside but more certainty — Guinness sells very well among Gen Z while their spirits portfolio continues to ebb along, if only growth in the low single digits.

Valuations always tend to normalise, especially for companies which make staples. Paying 30x earnings was always too much — I used to look at Brown-Forman enviously, and wish it were cheaper. Well, now it is! And nobody likes it. On chart is a couple of headlines from Barron’s.

I love to go counter-consensus to the media, because usually that’s a sign of peak pessimism. On chart are some headlines about Meta when everyone hated the stock in 2022/2023.

Obviously, the booze stocks are not Meta — Meta is a cash flow machine! Zuck wears a gold chain! Zuck would like us to know he is a Cool Guy!

But still — price drives narrative. Everyone was dissing Meta in 2022 (and I felt like an idiot buying it), now they love it. Ditto booze stocks. People aren’t going to stop drinking. That’s it. That’s the thesis.