3 Beverage Stocks Reaching Record Highs Amid Cannabis Craze

The expanding legalization of recreational cannabis is sparking fresh innovation within the beverage sector. Currently legal in nine U.S. states and Canada, marijuana sales surged by 57.4% in 2017, hitting $8.5 billion, with projections exceeding $20 billion by 2020. As consumers shift away from sugary drinks, beverage companies are capitalizing on this trend by developing cannabis-infused beverages that cater to health-conscious buyers and tap into the booming green market.

Investors interested in the intersection of cannabis and beverages should keep an eye on these three standout stocks. Let’s dive deeper into their growth potential.

The Coca-Cola Company (KO)

As the world’s largest non-alcoholic beverage producer, Coca-Cola generates $30 billion in annual revenue and owns iconic brands like Coca-Cola, Diet Coke, Fanta, Sprite, Minute Maid, Powerade, and Dasani. In September, BNN Bloomberg revealed Coca-Cola’s discussions with cannabis producer Aurora Cannabis Inc. (ACB) to create marijuana-infused drinks. As of November 12, 2018, KO stock boasts a 10.83% year-to-date return and a 3.14% dividend yield. Founded in 1886, Coca-Cola’s market cap stands at $211.46 billion.

The stock traded within a narrow $2.50 range between July and October before breaking out on strong Q3 earnings. Prospective buyers should consider entering near $46.50, where support aligns with the previous trading range’s upper boundary and the 50-day simple moving average (SMA).

PepsiCo, Inc. (PEP)

Based in New York, PepsiCo holds a $165.83 billion market cap and produces a wide array of nonalcoholic beverages alongside grain and snack foods. Founded in 1898, its portfolio includes Pepsi, Gatorade, Mountain Dew, Tropicana, Quaker, Lay’s, Doritos, and Cheetos. In early October, CEO Hugh Johnston indicated the company’s intent to "critically" evaluate cannabis investments. Trading at $117.48 as of November 12, 2018, PEP has slightly increased by 0.18% year-to-date and surged 8.66% over the past month, offering a 3.16% dividend yield.

After a 20% decline from February to May, Pepsi’s shares rebounded sharply through summer. Since mid-October, the stock has climbed near its YTD high of $119.52. Buyers should look for retracements to around $114, where trendline support from previous swing highs is expected.

Keurig Dr Pepper Inc. (KDP)

Keurig Dr Pepper, with a $39.62 billion market cap, emerged from the $18.7 billion merger of Keurig Green Mountain and Dr Pepper Snapple in July 2018. The company produces coffee products, Keurig brewers, soft drinks, and juices. While no public plans for cannabis-infused beverages exist, KDP’s strong presence in both K-cup coffee and soft drinks positions it well for potential partnerships with cannabis firms. The stock offers a 2.1% dividend yield and has soared 20.11% over the past three months, outperforming the beverage sector by nearly 14% as of November 12, 2018.

Notable chart patterns include the January 20 gap and the "three white soldiers" candlestick formation, both linked to the merger. After consolidating from mid-July to October, KDP broke out to new highs following an agreement to distribute Evian-branded bottled water in the U.S. Investors should target pullbacks to the $25 breakout level, which aligns with prior consolidation support.

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