What happened

National Beverage (NASDAQ:FIZZ) shareholders outperformed a rallying stock market last month. The stock rose 13% in May compared to a 4.5% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally added to April's gains to put the sparkling beverage producer in solidly positive territory, up 12% so far in 2020.

A woman enjoys a soda.

Image source: Getty Images.

So what

National Beverage had dropped along with bigger rivals like Coca-Cola during the stock market slump in late March as investors worried over reduced drinking occasions during home lockdowns. Coke and PepsiCo reported sharp volume declines, in fact, with Coke's April demand slumping by over 22%.

All three beverage stocks rebounded as the COVID-19 threat waned in May and as state plans to reopen retailing markets took shape. National Beverage's shares saw the most dramatic rebound, likely because of the company's focus on the high-growth sparkling water category.

Now what

National Beverage's La Croix brand posted steady growth in the months before the pandemic hit, and that marked a significant improvement from declines in 2019. The sparkling water segment is far more competitive today, though, and so investors shouldn't expect to see growth levels approaching the 20% surge that the consumer staples specialist posted in 2018. That fact, plus questions around demand trends through the recent retailing disruption, supports a cautious view about this rallying stock.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.