2 Energy Drink Stocks to Buy Hand Over Fist in March

Energy drink stocks are sparkling with caffeine-infused vitality in 2024. Every major name in this category has beaten the S&P 500 index over the last month — and by a lot, in some cases. And it’s not a broad surge across the whole food sector, or even beverages in general; industry giants Coca-Cola (NYSE: KO) and PepsiCo (NASDAQ: PEP) are underperforming the S&P 500 over the same period.

The energy drink sector tends to crush the broader stock market in the long run, so I’m not surprised to see the trend continue in recent weeks.

But you’re not here for a lesson in recent history — you want to see some great buys among the energy drink specialists. Well, buckle down. Two stocks in this category look like fantastic buys right now, for two different investing strategies.

Two taurine-infused peas in a pod

I’m talking about the dueling sector leaders, Monster Beverage (NASDAQ: MNST) and Celsius Holdings (NASDAQ: CELH). (Red Bull doesn’t count. It’s a private business so there are no shares of that company on the open market.)

First, let me show you how Monster has a couple of great qualities in common with Celsius:

Data sources: Finviz.com and company filings. TTM = trailing 12 months. CAGR = compound annual growth rate.

The details may be different but the fundamental facts are the same. You’re looking at two fast-growing businesses with strongly positive profit margins and robust cash flows. And both management teams have serious skin in the game thanks to significant holdings of common stock.

That’s a rare list of shareholder-friendly facts. In particular, you don’t see solid profits go hand-in-hand with high-octane sales growth very often, but both Celsius and Monster fit that description. I could go on and on, diving into details such as Monster’s global distribution partnership with Coke and Celsius’ similar deal with Pepsi. But I’ve made my point already — Monster and Celsius may have more in common than you thought.

Story continues

So let’s move on to what sets these energy drink titans apart from one another.

Size matters (but so does price)

There are some important differences between the two energy beverage leaders:

Data sources: Finviz.com and company filings. TTM = trailing 12 months.

These two businesses run on completely different scales. Monster is much larger than Celsius. Meanwhile, Celsius’ shares change hands at much loftier valuation ratios.

Both are technically growth stocks, but Celsius is the younger, faster, and more premium-priced option. Monster had its comparable heyday years ago and Celsius is still looking forward to a long-term evolution into a stable cash machine — like the Monster monster you see today.

Both stocks could be winners for the right kind of investor

There’s this spectrum of investment ideas in the non-alcoholic beverages industry. Coke and Pepsi are the obvious picks for investors seeking ultimate stability and operating excellence above all else. Celsius stands in the opposite corner, delivering incredible sales growth and inspiring nosebleed-level valuation ratios. Nobody calls Monster a compromise, but from this perspective, it kind of is. Here, you get a taste of the Celsius growth surge plus the predictable stability of a more mature business.

The two stocks target significantly different investor groups, though the Venn diagram of energy drink investors should include a substantial overlap between these cohorts.

So which is the better buy? It depends on your risk tolerance.

Take a look at your appetite for valuation risk and then invest accordingly. Celsius may be the pick for more adventurous investors, while Monster could appeal to more conservative ones. Both stocks look like fantastic long-term investments today, and I highly recommend giving them a serious look.

Should you invest $1,000 in Monster Beverage right now?

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.

2 Energy Drink Stocks to Buy Hand Over Fist in March was originally published by The Motley Fool