The best wine stocks include a wide variety of labels. Investors acquire exposure to the alcohol industry by purchasing shares in these companies. Moreover, regardless of the state of the markets, people continue to purchase alcohol.
It has a lengthy history, which bodes well for future profits. Before diving into the list of wine stocks, let us examine the entire business. This might help you determine whether or not these wine companies are a good fit for your portfolio.
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An Overview of the Wine Industry
Grapes are fermented into wine, which is an alcoholic beverage. The yeast absorbs the grapes’ sugar and transforms it into ethanol, carbon dioxide, and heat. Different grape varietals and yeast strains yield distinct wine styles. These variances result from the intricate interplay between the biochemical development of the grape, the fermentation reactions, the terroir, and the production method. Numerous nations have enacted legal appellations to specify wine styles and attributes. Typically, these regulations restrict the geographical origin, permissible grape types, and other aspects of wine production. Wines from other fruits besides grapes include rice wine and fruit wines including plum, cherry, pomegranate, currant, and elderberry.
Wine production dates back thousands of years. The first traces of wine were discovered in Georgia, Iran, and Sicily. However, there is evidence that a similar alcoholic beverage was consumed in China earlier. Armenia’s Areni-1 winery dates back 6,100 years and is the oldest winery. Ancient Greece, Thrace, and Rome consumed and celebrated wine in the Balkans by 4500 B.C. Wine has been drunk throughout history for its intoxicating effects. Wine has had an essential role in religion for centuries. Ancient Egyptians equated red wine with blood, as did the Greek worship of Dionysus and the Roman Bacchanalia; Judaism and Christianity employ it in the Kiddush and the Eucharist, respectively.
Is Wine a Profitable Investment?
As with any other alternative investment, they were purchasing wine that can give excellent portfolio diversity. Collectibles, like as fine wine, provide investment returns that have little to no association with standard assets and may even be negatively associated with the stock market.
You have likely heard numerous times from experts about the necessity of diversification. Wine provides a unique source of diversification because its value is determined by factors unrelated to economic performance, interest rates, business earnings, or conventional investor sentiment.
Weather patterns, harvest yields, vintage, and consumer trends all interact with supply and demand to influence the value of wine. Because these elements are unrelated to the stock market, wine investments might complement a conventional portfolio.
Top 10 Wine Stocks to Add to Your Profolio
1. LVMH Moët Hennessy Louis Vuitton
One of the world’s wealthiest people is LVMH CEO Bernard Arnault, who became wealthy because of his company’s extensive portfolio of luxury items. Luxury fashions are displayed beside bottles of champagne and other expensive drinks. According to the company’s name, Mot & Chandon Champagne is favored by the rich and renowned and is often reserved for ceremonial occasions. Dom Pérignon, Krug, and Veuve Clicquot are just a few other high-end champagne labels.
The LVMH champagne and distilled goods division reported a 15 percent drop in sales in 2020 because of the COVID-19 epidemic. Champagne is once again being boiled as the world economy finds its feet, and champagne contributes less than 20% of LVMH’s total sales. Nevertheless, the luxury conglomerate is a long-term growth stock, and its range of premium goods is in constant demand. In emerging markets such as China, the demand for ultra-luxury products is expanding rapidly. In addition, shares yield a little dividend. Look no further than LVMH Mot Hennessy Louis Vuitton if you are an investor seeking consistent growth from the king of luxury grape-based alcoholic drinks.
2. Diageo (DEO)
Diageo is headquartered in London and employs around 28,000 people. It is responsible for some of the most popular alcohol brands in the world, including Johnny Walker, Captain Morgan, Bailey’s, Don Julio, Guinness, Tanqueray, Ketel One, and others.
DEO has a market capitalization of $98.34 billion and a 52-week trading range between $120.12 and $170.39. The corporation pays a dividend of $3.73, trades an average of 451,724 shares daily, and has revenues of $15.74 billion in 2020.
3. Constellation Brands
Corona, Modelo, and Pacifico are just a few of the Mexican beers produced by Constellation Brands that have gained widespread recognition. As a holder of several well-known wine labels (Kim Crawford, Robert Mondavi, etc.) and a 40% stake in Canopy Growth (NASDAQ: CGC), this stock provides investors with exposure to multiple beverage industry sectors.
Constellation’s beer market, which accounts for almost three-quarters of total sales, drove the company’s rapid expansion prior to 2021. However, with an expanded selection of alcoholic drinks, the company’s future expansion is expected to be slower and steadier. An optimistic outlook is placed on the 25% of sales expected to come from wine and spirits. Constellation’s portfolio has expanded over time as the company has shown to be a wise investment in the beverage alcohol market. The company’s wine cellar and other alcoholic beverages have contributed to operating profit margins of more than 30% during the past few years. It also pays a small dividend, comparable to LVMH in terms of growth and income.
4. Treasury Wine Estates
The following suggestion takes you south of the equator and across the Pacific to Australia, a top wine-producing country. Regarding major Australian corporations, Treasury Wine Estates and Accolade Wines are both at the very top. However, the Carlyle Group, a private equity firm, has taken control of the company (NASDAQ: C.G.). The Treasury Wine Estates portfolio includes a wide variety of renowned wineries and brands, including Penfolds, 19 Crimes, Stag’s Leap, and Beaulieu Vineyard.
While Treasury Wine Estates is a unique business in that it is solely focused on the wine industry, its shares have failed to gain traction in recent years, especially after the pandemic. However, being one of the industry’s most prominent participants, it provides a respectable dividend and may be worth a look if you are seeking investment income.
5. Willamette Valley Vineyards (WVVI)
Willamette Valley Vineyards Inc. is an Oregon company that makes wine for worldwide distribution. The company’s main market is the United States. It releases a semi-sparkling Muscat wine under the Tualatin Estate Vineyards brand and offers Oregon Blossom wine under the Oregon Cellars brand.
Willamette Valley Vineyards has been in wine for over 30 years, making it one of the most established wineries in the country. Focus on the development of this brand in 2022. Regardless of how the wine industry changes in the coming years, Oregon will keep cranking out excellent vintages.
6. SVB Financial Group
The SVB Financial Group (also known as Silicon Valley Bank) may appear out of place. Ultimately, this bank was founded at the core of the global technology industry in California and promoted itself as a financier of the “innovation economy.” However, Napa Valley and Sonoma Valley are only up the road from Silicon Valley and are renowned wine regions producing premium aged grape juice products. Silicon Valley Bank is the premier financier for premium wineries and winery startups-to-be.
Given that SVB Financial operates in innovative fields worldwide, wine is an appropriate gift. When national economies improve and become more complicated, wine consumption increases as consumers gain income. Although Silicon Valley Bank may be a tangential player in the wine sector, its knowledge in this field should not be overlooked. This is a top growth story in banking, serving luxury vineyards and wineries.
7. The Duckhorn Portfolio
The Duckhorn Portfolio, a newly listed stock, is a top bet on the winemaking prowess of Napa Valley and other California wine regions, as well as Washington and Oregon. It consists of the brands Duckhorn, Decoy, and Canvasback.
The Duckhorn Portfolio may not have a long history as a publicly traded corporation, but it is off to an excellent start. In 2020, when wine consumption dropped due to the onset of the epidemic, sales experienced a robust recovery. The company’s most recent sales results indicated an increase in the high teens. Before that, the company’s brand management and wise investments in new winemakers allowed it to outpace the average sector growth rate. It has substantial debt on its balance sheet but also makes substantial profits. The Duckhorn Portfolio is worth a look if you are interested in high-growth wine stories.
8. Andrew Peller (ADW-B)
The Canadian company Andrew Peller limited develops, bottles, and markets a variety of wine and artisan alcoholic beverage labels. Peller Family Vineyard, Black Cellar, Copper Moon, XOXO, Domaine D’or, Sommet, Royal, Schloss Laderheim, and Hochtaler are among the labels distributed by Andrew Peller. Under the Wayne Gretzky no.99 label also manufactures No Boats on Sunday ciders and beer, spirits, cream whisky, and seltzers.
Icewine is Andrew Peller’s signature beverage. Along with this wine, we are also captivated by everything else that Andrew Peller produces, from wine to spirits to beer. They are a corporation whose products have regularly done well over the past few years.
9. Vintage Wine Estates
Vintage Wine Estates is a recent IPO company that became public via the SPAC merger in 2021. The portfolio contains wines from the whole West Coast of the United States, including Girard Winery, Clos Pegase, and Swanson Vineyards. Additionally, there are Ace Cider and No. 209 Gin.
Traditional channels of wine distribution sit alongside the company’s growing online direct-to-consumer wine to create what it calls an “omnichannel” experience for customers. Vintage Wine Estates is expanding at a double-digit rate, but it has substantial debt to counteract its cash on hand. Nonetheless, if you are searching for a fast-growing pure-play stock in the wine sector, this company has a distinct approach to winemaking and sales.
10. Brown-Forman Corporation (BF-B)
The Brown-Forman Corporation started selling booze in 1870 and is headquartered in Kentucky. Almost the past few years, shareholders of the company’s shares have earned a return of over 18%.
Jack Daniel’s, Woodford Reserve, Canadian Mist, and GlenDronach are a few of the company’s well-known products. Brown-Forman, one of the world’s largest publicly traded wine companies, produces Sonoma-Cutrer wine. Investors may want to keep watching this firm if you are interested in tracking industry giants in the wine and alcohol sectors. Without question, we have taken notice of their expansion during the past five years.
Which Is the Better Investment: Wine or Stocks?
Similar to how the S&P 500 is the standard for U.S. stock performance, the London International Vintners Exchange, or Liv-ex, is the benchmark for the fine wine market. The Liv-ex Fine Wine 100 increased by 270.7% from July 2001 to July 2021, beating the S&P 500 by eight percentage points over the same time, but only when dividends were excluded from the index’s performance calculation. S&P 500 outperformed Liv-ex by 60% during the same period when dividends were reinvested.
Since 2005, the Sotheby’s Wine Index has consistently outpaced the S&P 500, with results only momentarily converging in 2021. Since 2007, the Sotheby’s Burgundy Market has dramatically outperformed the S&P 500, and the Sotheby’s Bordeaux Market index has significantly outperformed the S&P 500 from 2005 to 2019.
In conclusion, wine can be a highly profitable investment. Note, however, that indexes like Liv-ex and Sotheby’s track tens, if not hundreds, of wines, and the performance of any given wine in the index may not precisely mirror the performance of the index itself.
To avoid placing too much emphasis on the performance of a single vintage or producer, you should diversify your wine collection similarly to how you diversify your stock portfolio. You will also focus on investment-grade wine instead of the cheaper bottles you would find in a local wine shop.
Alfonso de Gaetano, the creator of Curated, a newly-launched wine membership club, states, “Quality of the product is essential when selecting wines for investment. Quality also ensures lifespan, which is crucial because it allows the bottle’s owner to feel at ease if they decide to sell a fantastic bottle rather than use it. Rarity is also an important factor in the equation.”
Features to Look for in Wine Stocks
- Since there are so many well-known brands in the consumer essentials market, it is crucial to carry a variety of them if you want to succeed. Making a name for their product is crucial for vintners and distillers. Examples include the fact that when Americans want whiskey, they specifically request either Jack Daniel’s or Johnny Walker. For products with relatively low price elasticity of demand, such as everyday necessities, a company’s success depends on the strength of its brands.
- The profit margin before expenses: For companies that aren’t trying to expand their business, like those who produce consumer staples, gross margins might not be a valuable indicator of performance based on total sales alone. Companies in the staples market should be evaluated in terms of their gross margins, which may be determined by subtracting their total production costs from their net sales revenue. Companies with higher gross margins are more efficient with their capital because they can keep a more significant part of their gross profits.
- Distribution of Profits to Stockholders Producers of alcoholic beverages are not known for their creativity, and most are not interested in the rapid development of the tech sector. Instead, these companies routinely return capital to shareholders through dividends and buybacks. Invesco BuyBack Achievers ETF is an excellent example of an exchange-traded fund. It would be best if you looked for wine stocks from companies with a history of either raising dividends or repurchasing shares.
Other Ways to Invest in Wine
Investment wines (investment-grade wines) are a popular alternative investment option for investors who do not wish to engage in conventional investments such as:
- Dividend stocks
- Mutual funds
Here, investors purchase wine and resell it at a higher price via auctions, wine exchanges, or wine brokers after a minimum of five years. As investment wines are physical luxury assets, purchasing them could reduce some risks shareholders face when investing in wine equities, including long-term volatility.
While it is true that wine stocks have the potential to generate profits, it is also true that investors should be aware that wine stocks, like any other investment, are not without risk. Stocks in this sector are susceptible to market and wine industry fluctuations. Therefore, before investing, people should thoroughly evaluate their choices. Moreover, if investors are new to investing or it has been a while since they analyzed their investment accounts, compare brokers to ensure that their trading account has the most excellent features.