The King of Beers.

[Sniper]

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First, you could Google the Buffet thing and it would come up right away. I'm surprised you work in finance and didn't hear about this a month ago or so.

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Did a quick search before the other post, but didn't go back far enough... this was announced back in April apparently. Thanks!

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If you're looking for a stock to buy and then sell before Christmas, BUD isn't for you. If you're looking for long-term growth and returns above the S&P, I like their chances.

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This is basically what I said. It is important to remember that BRK buys businesses for the long haul and doesn't care much about short term results. However, the opportunity cost for an individual investor to act in a similar fashion is huge.

To quote Buffett with regard to BUD, "I would not expect the earnings to do much for some time, but that's fine for us."

Bottom line: Put BUD on your watch list, but make your profits somewhere else this year.

[RunDownHouse]

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Then why not sell now and buy back in sometime in the future?

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Because most of us aren't fortune-tellers.

First, let me say that I agree there are better prospects out there than BUD - Altria (MO) looks kickass, and I'd go there before BUD. But if you've got a good-sized portfolio, you like to pick stocks instead of just be in index funds, you like to buy big consumer products stocks, etc, BUD is a fine choice.

So I agree that there's an opportunity cost to BUD, but I disagree that its huge. Furthermore, outside of daytraders, nobody believes that you can predict the market. The only investment strategy that makes sense is to find the companies that have a sound economic basis and a reasonable stock price, and then jump in. You can judge the risk inherent in a stock: if a company has an inflated price and horrible economic underpinnings, there's a lot more downside risk than upside potential. The stock will drop much more on bad news and rise much less on good news than a company with sound economics and a reasonable price. But being able to predict when those ups and downs will come is impossible.

That sort of long-term growth strategy is the most reasonable one, and there's a reason Buffet has been so successful with it. We'd all love to find the next hot IPO or tech bubble or whatever, make a million dollars overnight and get out, but my crystal ball must be broken.

Oh, and your p/e numbers are a bit misleading, because p/e numbers are inherently flawed. They're bullshit. With a P/EBV of 1.15 and a CAP of 3, BUD is the cheapest its been in a long time.

[RunDownHouse]

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Sorry about this hi-jack...

RunDownTheHouse... you seem to know a lot about the wines/liquor/beer industry. Could you comment on Constellation Brands (STZ)? I've held this for a number of years now, and it has simply done great. What do you think of it going forward?

-RMJ

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I've only researched them from the perspective of the leader in an industry that's the biggest exogenous risk to the beer industry right now, so I don't know much qualitative stuff. But from a quick glance at their numbers, they look awful right now. P/EBV of over 5, and more worrisome, a FCFY of (11%) and (25%) over the past two years. They're definitely expensive right now.

PS None of this is to be construed as investment advice, past results aren't indicative of future performance, etc etc. This goes for all of my posts in this thread.

[Sniper]

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Because most of us aren't fortune-tellers.


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You don't need to be a fortune teller to time the market.

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Furthermore, outside of daytraders, nobody believes that you can predict the market.

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There are many people that follow simple market timing strategies that have been proven to work over time, and they are not day trading. Market timing and day trading are two very different things.

Suggested reading... Stock Trader's Almanac by Hirsh (updated Annually) and Paul Merriman's web site (he recommends timing mutual funds) at http://www.fundadvice.com/

[RunDownHouse]

Wait, are you saying that there's a simple, formulaic way to get returns above the S&P?

If so, why aren't we all just following this formula? It'd be like punching a clock, right?

[Sniper]

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Wait, are you saying that there's a simple, formulaic way to get returns above the S&P?

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The simple answer to the first question is Yes!

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If so, why aren't we all just following this formula? It'd be like punching a clock, right?

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For the same reason there are still Fish at the Poker tables. The uninformed masses don't take the time to educate themselves.

[AceHigh]

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Oh, and your p/e numbers are a bit misleading, because p/e numbers are inherently flawed. They're bullshit. With a P/EBV of 1.15 and a CAP of 3, BUD is the cheapest its been in a long time.

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Book value is a useless metric. I'll take p/e over book value every day of the week. If you think p/e is misleading what about book value. Do you realize that a piece of capitals book value has no relation to it's real world value? Often equipment has been depreciated to a zero accounting value is still be used to perform work.

[RunDownHouse]

Its not book value, its economic book value. Things like accelerated appreciation, write-offs, off-blance sheet financing, etc, are all pulled from the notes and accounted for. It is a much more accurate number than any metric designed for debt investors.

[AceHigh]

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Its not book value, its economic book value.

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If I understand it correctly it's still a crappy metric. Capital is only as good as the revenue/earnings it can generate. Bad management can still turn capital into losses. It's what you do with the capital that's important.

What happens if the downtrend in beer sales accelerates? Then who will buy the tools used to make beer when there is no market for beer? Unless a company owns assets that are very liquid it's dangerous to try and judge it value based on those assets. Often the very factors that are effecting the compainies business are effecting the potential price of capital.

Example, if we owned a bunch of printing presses for printing newspapers and suddenly it became much cheaper to print newpapers on laser printers, overnight our printing presses would become almost worthless.

[Sniper]

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Unless a company owns assets that are very liquid

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The Budweiser truck just pulled up with some more of those "liquid assets" [img]/images/graemlins/wink.gif[/img]