Even if you don't know the name Brown-Forman (BFB), you're probably familiar with some of the products this 142-year-old spirits distiller makes. The firm's portfolio includes Jack Daniel's, Finlandia vodka, Southern Comfort and Korbel champagne.
Right now, shares sport a short interest ratio of 12.47. At currently levels, it would take two and a half weeks for short sellers to cover their bets.
The liquor business is attractive for a variety of reasons. The first is industry-wide growth. Consumers are evolving their palates, and in turn, they're increasing their willingness to spend big on pricier small-batch spirits. That presents a huge opportunity for BF.B, one that the firm has taken advantage of with "sub-labels" of its extremely popular brands, such as Jack Daniel's Single Barrel. Those brands hold the keys to Brown-Forman's success. Buyers tend to be sticky when it comes to their liquor of choice, which means that price sensitivity isn't as much of a concern for Brown-Forman as it is for liquor sellers. The popularity of whiskey in particular in the last few years has been a big boon to BF.B considering the Jack Daniels marque makes up around half of the firm's total sales volume.
Like many so-called "sin stocks," Brown-Forman generates considerable cash. Around 25 cents on every dollar the firm takes in gets converted into profit, a hefty net margin for any business. Because of the size of the Jack Daniel's brand, this stock has historically been less internationally-exposed than many of its big spirit-producer peers. That leaves a lot of upside room as American whiskey gains popularity in markets like Russia and China.
To see these short squeezes in action, check out this weeks Short Squeezes portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.