Takeaway: We hosted a Black Book presentation on Best Idea Longs in the caffeine sector earlier today.

Webcast Replay & Materials: CLICK HERE

Hedgeye’s Macro Team continues to project two more quarters of Quad 4 in the first half of 2023. Consumer Staples historically is one of the best-performing sectors in Quad 4. However, investors are beginning to think about what lies beyond Quad 4 and how to prepare. 

Our Macro Team has called for another sell-off in the market which would be an opportunity to add one of our favorite trend and tail duration Long Ideas. In Consumer Staples, our tail duration long ideas consist of companies with strong secular growth tailwinds. Caffeine consumption is one such tailwind as consumers use more of the habit-forming drug in our always-connected lifestyles. Within caffeine, consumers are adopting cold coffee and energy drinks driven by younger consumers' preference for taste, convenience, and flavors. We have several Best Idea Longs in the caffeine sector from coffee companies including Westrock Coffee (WEST) and Black Rifle Coffee Company (BRCC) to energy drink companies Monster Beverage (MNST) and Celsius Holdings (CELH). 

Celsius is carving a niche in the growing energy drink category, but also bringing in new consumers. Celsius has aligned itself with healthy and better-for-you attributes that extend well beyond young consumers and the gym. Competitors are responding, but brand associations work against them and for Celsius. We see the niche becoming a significant portion of energy drinks. The PepsiCo distribution agreement and investment open more doors for growth and adds visibility to near-term results. We view the recent pullback in shares after a lawsuit judgment of $83M against Celsius as a buying opportunity. 

We hosted a Black Book presentation to review our top investment ideas that share the secular growth driver of caffeine. We added Celsius Holdings to our Long List as part of the research for the presentation. We reviewed how Celsius’ market position opens up different channels, consumers, and consumption events than existing competitors. Our investment themes for the call are:

Replay | Caffeine Longs For Quad 4 and Beyond | CELH, MNST, BRCC, WEST - a4 delete