| Author |
Message
|
| Dave Rathbun |
 Posted: Fri Jan 27, 2006 3:53 am Post subject: Anybody up for a BUD? |
 |
|
CFO
|
Yahoo 2 year quote chart:
I read an article on this one recently that suggests a turn-around is near. S&P maintains a "hold" recommendation. The article I read (no link, sorry, it's an actual magazine) suggests that while the domestic (US) market is nearly saturated BUD's well positioned for growth in Mexico / Latin America and recently increased their stake in a Chinese brewery. China has a few potential beer drinkers. 
They own 45+% of the domestic market. There next closest competition (which includes Coors and one other than I can't recall at the moment) is less than 30% combined.
BUD is a cash machine, with 2.7B in cash flow on an annual basis. They pay a dividend ($1.08 per share or 2.6% at current market prices). They report earnings next week, which this article suggests will not be pretty. If the stock drops after earnings, would you buy? Would you short today? Short interest increased 2M shares from November to December of 2005.
I realize this is not a sexy choice that might return 100% in a year. I'm interested in hearing opinions on a long term (two-year +) holding opportunity. |
|
| Back to top |
|
 |
| nelaina |
| Posted: Fri Jan 27, 2006 4:21 am Post subject: |
|
|
CFO
|
hmmm
personally i would not buy, however, I would agree that they do still have great growth opportunity in central / Latin America. Haha based on my personal experience I can say that many Mexicans Ive known LOVE bud. And slightly off, but one thing i notice about that industry is that there are a LOT of microbrews out there, and independent brewers that could use some help so its possible that BUD could help itself to some acquisitions down the line? |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Jan 27, 2006 4:47 am Post subject: |
|
|
CFO
|
My strategy, based on some reading and the link I provided above, is going to be to wait for the earnings report. A few years back I picked up INTC on an "earnings drop"... they went down 10% the day the reported earnings, and I picked up some shares.
I'm looking for something that I think has a very good chance to provide a solid 15-20% return over the next two years (10% annual). If BUD is a turn-around play, then it seems like this could be a nice opportunity. If it drops to say $40 per share after earnings, I can pick up 100 shares and hope that it goes to $50 in two years. I don't think that's out of the question, I'm just interested in other ideas.
Side note regarding this strategy... I have different strategies for stocks based on the account. This purchase will be in an IRA that was converted to a ROTH some years back. As it is a conversion, I cannot deposit additional funds. So the money in the account is all I've got, meaning that capital preservation is a high concern. If I lose money, I can't just go fix the problem by putting more money into the account. It's gone. For that reason I am often more conservative in this account. Dividend payouts are always good... and a stock that pays a high dividend and trades in a narrow range is fine. Or a stock that pays a smaller dividend and appreciates 5-10% a year is good too.
I'm more aggressive in other accounts, where I can fix "mistakes" by making additional deposits. |
|
| Back to top |
|
|
| nelaina |
| Posted: Fri Jan 27, 2006 5:01 am Post subject: |
|
|
CFO
|
The reason I say I would not buy is because of my own reasons for not wanting to choose that industry...it has nothing to do with the stock or the company.
however, based on the financials and the earnings outlook I would say buy...definitley when it goes down after the numbers are released. I agree that it would be a good turnaround play, as it is a solid company and they have good cash flow to make big things happen. I also see that the entire industry (domestic beers) is down, so it will definitley be a great time to get in. It seems like there may be a significant drop you might be able to get in under 40
 |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Jan 27, 2006 5:17 am Post subject: |
|
|
CFO
|
| nelaina wrote: | | The reason I say I would not buy is because of my own reasons for not wanting to choose that industry |
Can you elaborate, or is this something you would rather not share? |
|
| Back to top |
|
|
| poornewb |
| Posted: Fri Jan 27, 2006 6:35 am Post subject: |
|
|
Investing Manager
|
| Dave Rathbun wrote: | | nelaina wrote: | | The reason I say I would not buy is because of my own reasons for not wanting to choose that industry |
Can you elaborate, or is this something you would rather not share? |
Alcoholic beverage company, Got to have your morals.
Who's to say that the market share wont keep going down and the they wont start to loose market share? I went into a bar the other day they had about 20 to 30 on tap beers and bud was not one of them.
I guess you could always wait and see if nascar adds race's seems that all people drink at the races. |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Jan 27, 2006 7:25 am Post subject: |
|
|
CFO
|
| poornewb wrote: | | Alcoholic beverage company, Got to have your morals. |
Do you? 
I posted in another topic about "socially conscious investing". I am not a fan of smoking... nobody in my family smokes. I do believe that many of the companies that provide cigarettes violated laws (not to mention the public trust) with their products, their marketing campaigns, and so on. Yet I've owned Altria (formerly Philip Morris) for many years.
Why do I invest in a company that makes products that I don't now and never will use? Simple, it's my way of getting back at them. Think about this... how much money does a company make when you buy their stock? Zero. Nada. Zilch. Unless you're buying into a public offering any money to be made from the sale of company stock goes to the owner of the stock, not the company. So MO is not making money from my investing, I am.
The fact that they are currently paying 4.3% dividend is a nice bonus too.
So yes, you can make a "social statement" and refuse to buy BUD on moral principals. Or MO for that matter. I don't know if that was nelaina's reason or not, and if they choose not to say that's fine. I was just curious. |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Jan 27, 2006 7:48 am Post subject: |
|
|
CFO
|
Here's the link to my other post about MO.
Here's my challenge to anyone that would say that you can't buy BUD on moral grounds... do you hold every possible investment opportunity up to the same scrutiny? If so, then bravo to you. If not, then it's a bit of a double-standard, isn't it?
Don't buy eBay, then, because they allow the sale of pornographic materials. There was the much-publicized boycott of Disney (DIS) by the Baptists in 1997, which lasted until 2005. There was an article I read a few years ago (can't find supporting info on the web to link to) that pointed out there are quite a few "big media" companies (Sony, TW, Fox) that are involved in pornography. Gambling? Investing in casinos and hotels is out.
The bottom line is that everyone must make their own decision on this point, and I'm not trying to claim that you should invest in companies that you are not comfortable with. I am personally not a beer drinker. But given those parameters I'm still willing to try to make some money off of the stock. |
|
| Back to top |
|
|
| vetelmo |
| Posted: Fri Jan 27, 2006 8:11 am Post subject: |
|
|
Moderator
|
| nelaina wrote: | hmmm
personally i would not buy, however, I would agree that they do still have great growth opportunity in central / Latin America. Haha based on my personal experience I can say that many Mexicans Ive known LOVE bud. And slightly off, but one thing i notice about that industry is that there are a LOT of microbrews out there, and independent brewers that could use some help so its possible that BUD could help itself to some acquisitions down the line? |
I dont think bud can be that big of a growth opportunity in latin american. One reason: It's been in latin america for years and it sells for more than the local product usually. I live in a section of california that has a huge mexican population and the beer of choice here is either Tecate or Pacifico. I lived in central america for 4 years as well. Just telling you from my own experience. |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Jan 27, 2006 8:20 am Post subject: |
|
|
CFO
|
| To clarify... I wasn't talking about actual Budweiser sales in Mexico. They own a local brew they sell. I'll get the name and post it later. Same for China, I believe. |
|
| Back to top |
|
|
|
|
 |
| poornewb |
| Posted: Fri Jan 27, 2006 8:32 am Post subject: |
|
|
Investing Manager
|
Do I personally not by stocks because of morals, No
Your right why not make money off of them or save yourself money. I hate walmart ecspecially being union myself but dangit I cant justify paying more for certain things just to prove a point. Cramer says it all the time dont let your morals get in the way of making money. |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Jan 27, 2006 8:44 am Post subject: |
|
|
CFO
|
| poornewb wrote: | | Cramer says it all the time dont let your morals get in the way of making money. |
Okay, so now I'm going to take the opposite side.  There are a number of SRI (Socially Responsible Investing) mutual funds out there, and more than a few are beating their associated benchmarks (S&P 500, and so on). So if you look, you can find funds that will invest the way you want to and still abide by your moral compass.
Let me be absolutely clear about this point: I am not making a judgement for or against this style of investing. It's an option, I just don't subscribe to it.
Here's a link I found while researching this post. (Yes, I do that. )
Ten worst corporations of 2004
Ten worst for 2003
2002
... and the index to the list of articles.
I've just discovered the site, and there is some interesting reading. But remember that anyone can throw up a web site and say whatever you want to say. If you see something interesting / shocking / and so on, find confirmation from 2 or 3 other sources. |
|
| Back to top |
|
|
| Dave Rathbun |
| Posted: Fri Jan 27, 2006 12:40 pm Post subject: |
|
|
CFO
|
| The brewery that BUD has an interest in for Mexico is Grupo Modelo (50% ownership) and in China Tsingtao Brewery (27%). |
|
| Back to top |
|
|
| frusnak |
| Posted: Fri Jan 27, 2006 12:49 pm Post subject: |
|
|
CFO
|
Has anyone seen the movie "Lord of Wars"? The theme of the movie deals with what is being discussed here. I had some strange dreams after watching this movie!  |
|
| Back to top |
|
|
| nelaina |
| Posted: Fri Jan 27, 2006 4:35 pm Post subject: |
|
|
CFO
|
I just wanted to answer your question Dave, my reasons for not choosing that industry well, basically when weighing which stocks to buy (since my money is limited) I would just rather put my money someplace else, someplace where I can follow it a little bit better and keep abreast of whats happening in the industry...and personally I find it hard to gauge the alcohol/brewing industry. Its kinda like saying the opportunity cost of investing in brewers for me would be high, when i can choose to invest in other industries that im more on top of and interested in following.
it definitley has nothing to do with moral issues, trust that ...in fact im still watching a company called WVVI, but i have not bought it and probably wouldn't. |
|
| Back to top |
|
|
|
|
stock market game on the web. At eInvesting you compete for monthly cash prizes while you interact, make virtual dollars, purchase items, and trade in the realistic stock market simulator. We make investing FUN!
