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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of energy-drink maker Monster Beverage (Nasdaq: MNST ) tumbled as much as 18% following news that it was being sued by the family of a 14-year-old girl who drank Monster Energy drinks and subsequently died.
So what: According to claims in the lawsuit, Monster failed to properly disclose the dangers of its product. Anais Fournier died in December 2011 from caffeine toxicity after drinking two 24-oz. cans of Monster Energy on consecutive days. In a separate press release from the family's law firm released on Friday, it noted that six deaths and 15 hospitalizations have been associated with Monster Energy since 2009.
Now what: Although this is merely one lawsuit and Monster is innocent until proven guilty, the prospect for regulatory action against energy-drink makers is a topic I've pressed upon numerous times in the past. In addition to being subject to potential industry regulations, energy-drink makers like Monster Beverage aren't priced attractively, either. Even down more than 40% from its 52-week highs, Monster is still trading at 19 times forward earnings. Similar to the tobacco industry, which faces increasing regulatory scrutiny, I see the energy-drink sector facing the same fate, and I'd consider steering clear of Monster Beverage in the meantime.
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