Last week marked the end of another "Dry January"...
Dry January is a wellness challenge to stop drinking alcohol for a month. The campaign has been around for the past 11 years... And it's getting more popular.
A recent poll revealed that 25% of Americans completed the challenge in 2024, up from 16% in 2023.
The growing U.S. love affair with sobriety is getting medical support, too...
The U.S. surgeon general published an advisory last month noting a "well-established" connection between alcohol and cancer. The report also urged Congress to slap a cancer warning on alcoholic products.
Of course, these health trends are causing big headaches for alcoholic-beverage companies. But the most surprising headwind is one you might not have considered.
You see, pharmaceutical companies have created the ultimate vice killer – and it comes in a syringe...
I'm talking about GLP-1 inhibitor drugs. These are the new blockbuster treatments for diabetes and weight loss. They tend to stop cravings and make patients feel full. And doctors are suggesting the meds help curb alcohol cravings, too.
Taken together, the popular narrative is that alcohol use is in permanent decline. And alcohol makers have taken a heavy beating in the market.
But one metric suggests that this narrative is just noise. The decline is likely about to change course... which means alcoholic-beverage makers are setting up for a run higher.
A single prescription could snuff out all of humanity's worst cravings...
That's the promise of GLP-1 inhibitor drugs like Ozempic, Wegovy, and Zepbound. And the effects may be even wider than most people think.
In October 2023, a small trial study showed that taking a GLP-1 inhibitor drug (known by the name exenatide) tended to reduce alcohol use in patients seeking addiction treatment when taken in a 24-week course. Take a look...
Folks in the trial reported less drinking after six months of taking a new GLP-1 inhibitor.
If these effects hold true for the general population, that might seem like bad news for alcohol stocks as these drugs grow in popularity. But here's the problem with that bearish view...
The vast majority of GLP-1 drug recipients cancel their treatments.
That's the result of an analysis by pharmacy benefits manager Prime Therapeutics. This study revealed that just 15% of patients kept taking the medication after two years of use, even though folks who quit gained the weight back.
And that two-year window is becoming important...
Novo Nordisk's (NVO) GLP-1 blocker Wegovy was approved by the U.S. Food and Drug Administration ("FDA") in June 2021. Its other similar drug, Ozempic, has been partly used for weight loss since it was FDA-approved to treat Type 2 diabetes in 2017. And competitor Eli Lilly (LLY) received FDA approval for its own weight-loss drug, Zepbound, in November 2023.
All three drugs made a huge splash when they first appeared. But the critical two-year window is closing – or has already closed – on all of them. And that means the once-hated alcoholic-beverage sector might already be starting an uptrend.
We can get a glimpse of this by comparing shares of NVO to the market's biggest brewery stock, Anheuser-Busch InBev (BUD)...
To do this, we'll simply divide the price of BUD by the price of NVO. When this ratio rises, BUD is gaining value relative to NVO... And when it falls, NVO is winning the race.
As you'd expect, the brewery has been hammered by the pharma company since 2021. But today, that's starting to reverse. Take a look...
This top alcohol company is starting to gain value relative to this leading weight-loss-drug company. And this trend is likely just beginning.
Brewery stocks crashed as GLP-1 blockers have swept the nation in recent years. But America's love affair with these medications could soon be over.
Don't count alcohol stocks out just yet. The sector is cheap, hated, and in an uptrend today. And that's the ideal setup for a fierce comeback rally.
Good investing,
Sean Michael Cummings
Further Reading
"Homebuilders clearly fell too far, too fast," Brett Eversole writes. One key indicator shows the recent decline in homebuilder stocks is overdone. And according to history, the next homebuilder boom could already be underway... Learn more here.
"Folks aren't buying," Brett says. "They just keep selling." Investors hate gold stocks today, despite an impressive run-up last year. But once this negative sentiment reverses, we could see a massive rally begin... Read more here.
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