Guzzle Velocity: Celsius and the Energy Drink Explosion

SPEAKER_1 (0:00)

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Jack Hough (0:33)

Is it wrong to stereotype energy drink consumers? Probably, but I'm going to give it my best shot anyway. In this week's episode, we look at the energy drink explosion and a recent sell off in one of the stocks and whether it's a bubble or a buying opportunity. If you're aware of Red Bull, but you don't know your C4 from your Elani new, don't worry. I've got you.

We'll also get some stock picks this week from Kate Lakin. She's the director of research at Franklin Templeton. There's no caffeine stocks in the mix, but there are names from software, vacations and insurance.

Let's get into it.

Listening in is our audio producer, Emily Sumlin. Hi, Emily. Hi, Jack. We are putting this in the can, as they say, I'll be away for a week. And so we're recording this a little bit earlier than usual. I say that just because the stock market has been a little topsy-turvy of late, and there's things happening. And I don't want to be accused of being off the news. If there's some kind of big event that goes on, if there's a takeover by armed flamingos, if they've somehow learned to use firearms and there's an uprising, and people are saying Jack is talking about energy drinks. He hasn't even mentioned the flamingos were fighting for our lives out here. What's going on? It's only because we're recording this a little early. I'll talk about the flamingos next week. We'll get back on the news. Does that make sense?

Emily Sumlin (2:01)

I know. What are you going to do with your luxurious time off?

Jack Hough (2:04)

It's just stuff around the house. There's nothing too fancy having it. It's just catching up on regular stuff.

Emily Sumlin (2:09)

Well, I'll be arming the flamingos while you're gone. I knew it.

Jack Hough (2:13)

I knew it.

I'll just say a couple of very quick words about what has happened in the stock market. First of all, as we speak, I look at it 20 times earnings, not extravagantly expensive, fully, ambitiously priced, let's call it. But the latest earnings growth rate, I show from the third quarter, 34%, which is unbelievable.

If you're not bouncing back from a recession, which were not 34% earnings growth is almost unheard of.

If you dig a little deeper into those numbers, of course, we all know that's the AI build out. But if you look at the median company, in other words, the middle company, you don't want the numbers to be skewed by those big companies. The median company, the growth rate there was 14.4% for the third quarter, also very strong. If you exclude tech and energy and materials, where some of the numbers have been skewed, the growth rate for the rest of them, 12.6%.

That's about the best earnings growth we've had since the global financial crisis. So if you're paying 20 times earnings for great earnings growth, it doesn't seem too extravagant. Of course, the question is how long will this earnings growth rate last? It's not going to stay this good forever. One thing I want to tell you about some of the wild price swings we've had since the midterm elections is do not underestimate the possibility that the stock market is an idiot in the near term. There is this tendency to think that the market is always delivering us collective wisdom from on high.

In my business, what we try to do is after the fact, we assign a story line to whatever the market did. We say the market did this because of that. Then that just becomes the way it is. But sometimes the market doesn't know. I mean, in the long term, the market figures it out. But sometimes the market really doesn't know. So when you saw this democratic sweep in the election, and then stocks went way up and people said, well, the stock market likes the Democrats. Great. Then the next day, the stock market went way down. People said, well, the stock market doesn't like the Democrats. I mean, you can't go by one day's reaction and the movement immediately after. And I've always been one to discount the connection between which political parties are in office and what the stock market is doing. There are a lot of reasons to discount that. I mean, you can't know something by looking at history because the sample size is too small. The meaning and makeup of the parties changes over time. Sometimes the parties are more or less effective at doing the things they want to do. And also, the timelines don't always match up neatly. So you can't really say, well, we've got this makeup in Congress and the White House, and therefore the stock market should do this. Forget about it. I think the market looks reasonably priced to me. And what would you expect when you have a period where bond yields have jumped? The market has been shaking that off because everyone's excited about AI. But in a world where bond yields are higher, stocks should have a little more trouble competing for investor affection with bonds. You would expect the market to sell off a little bit. So that's about all I have to say for now. If if the market takes a wild move in either direction while I'm away, when I come back, I'll tell you about how I saw it coming all along and I'll explain it in hindsight. And with that, let's get to what do you think, Emily, energy drinks. What's your caffeine status? Are you a caffeine participant? Are you a coffee person? Have you had an energy drink? What's going on over there? I'm picturing you carrying two of them in holsters, side holsters, but go ahead.