Kapitalust Posted September 10, 2018 Share Posted September 10, 2018 Nothing too complicated with this one: - Largest brewer in the world - Stock price at lows not seen since summer 2013 - Huge debt load from the recent merger with SABMiller - Intriguing dividend yield above 4%, despite the 30% withholding tax - Run by management from 3G I'm thinking that this is melting down along with the current emerging market meltdown, as it has large market exposure in emerging markets. I'm also thinking the market isn't too pleased with the tepid growth and high debt load. While I think this could be a situation of trying to catch a falling knife, I'm also thinking it's a price that hasn't been available in 5 years. I've bought some in the mid and low $90s. Pondering whether to buy even more now. Anyone buying at this point? Link to comment Share on other sites More sharing options...
petec Posted September 10, 2018 Share Posted September 10, 2018 Considering it but haven't done the work yet. The growth issue is the one I will focus on. It may be better to buy the Ambev. Link to comment Share on other sites More sharing options...
txvalue Posted September 11, 2018 Share Posted September 11, 2018 With these stocks you should take into account potential headwinds from the legalization of cannabis. Not everyone holds the same opinion on how things will shake out, but I know folks who say their research shows it is going to be a problem. Might be worth looking at a stock like Altria. It shares many of the characteristics you mentioned in the original post. They have a large ownership stake in BUD and experience with branding and working through regulations/red tape, which could come in handy if they make an entrance to the cannabis market down the road. Link to comment Share on other sites More sharing options...
rb Posted September 11, 2018 Share Posted September 11, 2018 With these stocks you should take into account potential headwinds from the legalization of cannabis. Not everyone holds the same opinion on how things will shake out, but I know folks who say their research shows it is going to be a problem. Because stoners don't drink beer? Link to comment Share on other sites More sharing options...
Gregmal Posted September 11, 2018 Share Posted September 11, 2018 With these stocks you should take into account potential headwinds from the legalization of cannabis. Not everyone holds the same opinion on how things will shake out, but I know folks who say their research shows it is going to be a problem. Because stoners don't drink beer? Yea IDK I've actually started buying Heineken a bit lately but think the marijuana thing is utterly overblown. The first aspect is this; the second it is fully legal, anyone with resources will get into it. Its not like these second rate companies that are currently trading for billion dollar valuations are going to have a monopoly on pot. Second, even in regards to it's medical uses, again, there is nothing proprietary about it. No barriers to entry. Nothing. It's a commodity. Third, the TAM really isn't that big. People are acting like if legalized we're just going to have a country(actually in many cases, a world) full of useless, high, zombies. (Hopefully) we won't. Link to comment Share on other sites More sharing options...
petec Posted September 11, 2018 Share Posted September 11, 2018 Sorry-why’s this relevant to BUD? Link to comment Share on other sites More sharing options...
txvalue Posted September 11, 2018 Share Posted September 11, 2018 With these stocks you should take into account potential headwinds from the legalization of cannabis. Not everyone holds the same opinion on how things will shake out, but I know folks who say their research shows it is going to be a problem. Because stoners don't drink beer? Yea IDK I've actually started buying Heineken a bit lately but think the marijuana thing is utterly overblown. The first aspect is this; the second it is fully legal, anyone with resources will get into it. Its not like these second rate companies that are currently trading for billion dollar valuations are going to have a monopoly on pot. Second, even in regards to it's medical uses, again, there is nothing proprietary about it. No barriers to entry. Nothing. It's a commodity. Third, the TAM really isn't that big. People are acting like if legalized we're just going to have a country(actually in many cases, a world) full of useless, high, zombies. (Hopefully) we won't. The point was that their research showed that they do drink and that for some marijuana can be a substitute. Greg, the rest of this was a bit off topic. I just wanted to point out a risk to the OP not derail the thread. Link to comment Share on other sites More sharing options...
Gregmal Posted September 11, 2018 Share Posted September 11, 2018 With these stocks you should take into account potential headwinds from the legalization of cannabis. Not everyone holds the same opinion on how things will shake out, but I know folks who say their research shows it is going to be a problem. Because stoners don't drink beer? Yea IDK I've actually started buying Heineken a bit lately but think the marijuana thing is utterly overblown. The first aspect is this; the second it is fully legal, anyone with resources will get into it. Its not like these second rate companies that are currently trading for billion dollar valuations are going to have a monopoly on pot. Second, even in regards to it's medical uses, again, there is nothing proprietary about it. No barriers to entry. Nothing. It's a commodity. Third, the TAM really isn't that big. People are acting like if legalized we're just going to have a country(actually in many cases, a world) full of useless, high, zombies. (Hopefully) we won't. The point was that their research showed that they do drink and that for some marijuana can be a substitute. Greg, the rest of this was a bit off topic. I just wanted to point out a risk to the OP not derail the thread. I don't really get how this is off topic. It was brought up that marijuana could be a threat to these types of companies. I explained why I don't think that is the case, at all. There is no reason to think Bud, BF, TAP, or SAM, or MO, BTI, etc wouldn't walk right into this market when they wanted to. These companies have all the resources and political connections necessary to do it. When you look at all the garbage currently in this space, and the shady/questionable characters involved, I'd even wager the powers that be would encourage it. You don't really see these types of companies(in the weed biz) and characters in tobacco and alcohol anymore. They'll get smoked out of marijuana too. If anything this becomes an advantage for a company like BUD. I mean if what's on topic is that people might prefer weed to beer, than I don't know how it's off topic questioning why BUD wouldn't potentially be a beneficiary of that?? Heineken currently has a cannabis infused beer. Off topic? Link to comment Share on other sites More sharing options...
wisborough Posted September 11, 2018 Share Posted September 11, 2018 The problem with this stock is its massively short the dollar . Not just from a translation point but transaction ( raw materials are in USD) and it’s balance sheet - it’s a giant carry trade . The other problem with this company is it’s US operations ( that service the debt and supports the capital structure ) are in decline - face it BUD and BUD LIGHT are yesterday’s beers - yet they are still 70pc of the AB portfolio in the US, plus the US beer market is ex growth losing share of throat to spirits and wine consistently . Unless the USD falls , I don’t see the stock working . Link to comment Share on other sites More sharing options...
txvalue Posted September 11, 2018 Share Posted September 11, 2018 Beer sales are in decline domestically and BUD's major brands have seen pretty large 5% ish drops in terms of volume. People are consuming more craft beer as well as things like wine which they view as an alternative that is healthier. On top of this there is the Cannabis threat. Sure BUD may get into this like you mention and there is a lot of data that says drinks will be a popular delivery mechanism but they haven't entered the market so there is a risk they miss the boat. You could fill bookshelves with examples of well capitalized companies making these type of mistakes. BUD missed the boat with craft beer for example. I don't think you explained why it will not be a threat, as much as you explained that anyone could get into the space. So in my eyes there is a core business that is declining with a threat of a new product on the horizon that may further dent sales. I have talked to people at Altria who have said that BUD feels this is a risk. I will leave my thoughts at that. Link to comment Share on other sites More sharing options...
Gregmal Posted September 11, 2018 Share Posted September 11, 2018 BUD to me is IBM. Better companies out there and their problems are largely their own doing. Like I said, I own HEIA Link to comment Share on other sites More sharing options...
Simple Investor Posted September 13, 2018 Share Posted September 13, 2018 TAP looks like a good alternative. Have the number #2 and #3 beer in the US. A bunch of #1's around the world. Also tout the largest craft portfolio. With large dividend raises likely in mid 2019 after they pay down debt. Isn't everything ups and downs? These companies have weathered storms before and i think they figured out a way to move forward. Link to comment Share on other sites More sharing options...
Kapitalust Posted October 11, 2018 Author Share Posted October 11, 2018 For what it's worth, I sold out my position at a loss. My timing was wrong and it seems like there are more probable factors that could take this further down than back up in the next few years. Link to comment Share on other sites More sharing options...
txvalue Posted October 25, 2018 Share Posted October 25, 2018 Tough earnings release and mgmt "rebased" the dividend. (cut 50%). Should be interesting to see how the market reacts to the cut after a few days. Larege companies with high div yields and large debt piles in similar spots like AT&T are no doubt watching this closely. Link to comment Share on other sites More sharing options...
petec Posted October 25, 2018 Share Posted October 25, 2018 Tough earnings release and mgmt "rebased" the dividend. (cut 50%). Should be interesting to see how the market reacts to the cut after a few days. Larege companies with high div yields and large debt piles in similar spots like AT&T are no doubt watching this closely. Yes. Does make me wonder if KHC will do the same. Link to comment Share on other sites More sharing options...
DooDiligence Posted March 29, 2019 Share Posted March 29, 2019 https://www.richmond.com/business/local/former-ceo-of-henrico-based-altria-to-become-chairman-of/article_4d4b5232-8ceb-5fe2-acda-b78ff491c16e.html Link to comment Share on other sites More sharing options...
Guest eatliftinvestgolf Posted June 28, 2019 Share Posted June 28, 2019 Discussion about BUD starting on page 4 is excellent. https://www.cookandbynum.com/wp-content/uploads/2019/05/Cook-Bynum-03.31.19-Semi-Annual-Report.pdf Link to comment Share on other sites More sharing options...
Guest eatliftinvestgolf Posted July 2, 2019 Share Posted July 2, 2019 https://www.reuters.com/article/us-ab-inbev-asia-ipo/ab-inbev-seeks-9-8-billion-for-asia-unit-in-worlds-largest-ipo-this-year-idUSKCN1TX0EL "The deal will raise between $8.3 billion and $9.8 billion for heavily-indebted AB InBev before any over-allocation option is included, giving Budweiser Asia a market capitalization of up to $63.7 billion after the IPO." pricing the transaction at 18x EBITDA; compared to 11x EBITDA for AB Inbev parent co. Link to comment Share on other sites More sharing options...
rb Posted February 28, 2020 Share Posted February 28, 2020 The stock is being taken behind the woodshed. Absolutely Brutal! Link to comment Share on other sites More sharing options...
StubbleJumper Posted February 28, 2020 Share Posted February 28, 2020 The stock is being taken behind the woodshed. Absolutely Brutal! Haven't you heard? We are all going to stop drinking beer because of the coronavirus! SJ Link to comment Share on other sites More sharing options...
rb Posted February 28, 2020 Share Posted February 28, 2020 Well I'm doing my best to support the company in these trying times with a can of beck's right now :) Link to comment Share on other sites More sharing options...
Kaegi2011 Posted February 28, 2020 Share Posted February 28, 2020 I just sold Jan 22 puts at $55 and bought 2x same expiry calls at $65. At ~$46 bucks it's LTM 8x FCF (rough math) so feels like good downside protection, and *hopefully* 20 months from now the beer virus blows over. Plus, how ironic that they named the beer after the virus? ;D Link to comment Share on other sites More sharing options...
Junto Posted May 5, 2020 Share Posted May 5, 2020 Starting to look interesting. Anyone else digging into this stock at these levels? $41.25. It's hated but with any recovery should start to see runway? No position yet but certainly reviewing. Link to comment Share on other sites More sharing options...
rb Posted May 5, 2020 Share Posted May 5, 2020 I own some but haven't added. It's a bit unbelievable to think that I lost 50% on a "safe" business. So I'm thinking that maybe my compass isn't working that well with this one. What is obvious is that the SAB Miller acquisition was an unmitigated disaster and destroyed a lot of value. Remember the guys were supposed to be the best at operations and at doing deals. Turns out that maybe that's not true and now they're also levered up to their eyeballs. Seems they couldn't help themselves from doing deals. You can also see it with QSR where they paid a massive price for Popeyes even though QSR was massively levered up. The only positive with BUD is that they're so large that they can't make another deal. But I have this fear in the back of my mind that they'll decide to "transform" into a "beverage company" and buy Diageo or some soft drink company or something. Bottom line, I've pretty much lost confidence in the management. Link to comment Share on other sites More sharing options...
Foreign Tuffett Posted May 5, 2020 Share Posted May 5, 2020 I think the thing to watch here is the sale of their Australian operations to Asahi. Debt load is much more manageable if/when this closes. Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now