The King of Beers.

[OrangeCat]

It's all juniors fault.

[James Boston]

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This is terrible advice, why would you stay in a down sector?

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I have no problem waiting out cyclical trends. If you think the sector has no future, then that's a legitmate arguement. Otherwise, please tell me why BUD won't out-perform the sector, once the sector improves.

[James Boston]

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Actually, they are underperforming their industry group (Beverages - Alchoholic) by a fairly wide margin over the last 52 weeks.

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You have to understand, I'm with BUD for the long haul, so I really don't care how they compare to the industry as far as trading goes. Their margins are better, their EPS is better, and their P/E is better (this came from just a quick glance at Yahoo Finance). They account for nearly, if not more, than half of domestic beer sales. You're going to be hard pressed to convince me that they lack staying power...now I must drink some BUD.

[AceHigh]

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If you think the sector has no future...Otherwise, please tell me why BUD won't out-perform the sector, once the sector improves.

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Obviously the sector has a future, you are just in the wrong part. The money that to be made in this sector is in some of the wine and liquor companies. The trend is towards upscale drinking and away from cheap beers.

Also, if a stock is struggling, I like to leave it and wait until it starts to perform to come back into it. Yes, I will miss the bottom, but this way I'm not stuck in an underperforming stock. Don't stay in a stock waiting for it to turn around, find a stock that has turned it around.

[DVO]

Well, Buffett just bought this stock. They haven't released the exact amount, but since he only gets involved in meaningful purchases, it has to be at least $1 billion worth.

Generally if you can buy a stock below the level Buffett buys - which is very rarely possible- you will make a lot of money in the long run.

I haven't looked at it closely but I am going to.

They have a dominant position in the beer market and at some point beer (vs. hard liquor / wine) will recoup its status.

For the next year or so BUD may be dead money, but I wouldn't bet against beating the S & P with this stock over the next 5 or 10 years.

[Sniper]

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Well, Buffett just bought this stock

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First, do you have a source for this info?

Second, Buffett doesn't buy anything, Berkshire Hathaway makes investments.

Third, most transactions reported are really trades made by Lou Simpson managing the equities held by GEICO.

Fourth, the majority of Berkshire Hathaways earnings are not coming from its large ownership stakes in publicly traded companies.

[RunDownHouse]

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.

Second, I'm with JB on this: if you're not looking to get in and get out again, BUD is a good stock. They're pretty damn cheap right now, with a Price/EBV of 1.15. Their FCFY was 1.9% in '04, down from 3% in '03, but this is because of the heavy investment in China. China is the largest market in the world, and they consume more beer than the third, fourth, and fifth largest markets combined. Harbin, who was acquired in '04 right from under the feet of SABMiller, is the fourth-largest Chinese brewery, and AB also owns a 29% stake in Tsing Tao, the number one brewer. In addition, AB's brewery at Wuhan produces all the AB products for Asia, including Budweiser, the number one super-premium brand in China. Considering their strong and improving foothold in China, AB is well-positioned to take full advantage of the industry consolidation that many expect to take place in China. Currently, there are almost no national breweries in China; Harbin itself is only regional. As China urbanizes, the industry should undergo a consolidation much like the US experienced in the early to middle of the 20th Century. So far, it looks like AB's strategy is to increase share through acquisition. This proved successful for them in the past, but the risk is that they'll overpay for the assets.

Here's a hard-hitting fact about the potential of China: current consumption is 270 million barrels, or 20L per capita. Per capita consumption in South Korea and Japan is 45L per capita. If China simply matches the consumption of its neighbors, the world's largest market will more than double. All through endogenous growth. Unreal.

Domestically, the increasing popularity of wine and spirits has hurt the beer industry more than they expected. In fact, until two years ago the beer industry didn't even track liquor sales. There is hope, though, in that this could represent simply a trend. The low carb backlash has already begun, for example, and that trend was also partially responsible for the decline in beer popularity, since beer is viewed as full of calories and carbs. AB is also attempting to regain market share from wine and spirits with the introduction of new product lines. The Bacardi Silver line competes directly with drinks such as Smirnoff Ice, and B to the E is targetted at club-goers who have turned from beer to cocktails in recent years. The introduction of APLs and other packaging innovations, such as 16oz aluminum cans for the Michelob family, are designed to reintroduce beer as a classy, sophisticated drink. For those who still love beer, Bud Select has been a big hit. Since its introduction in January, it has captured a 1.9% market share, better than Mich Ultra at the same point in the product life. If Bud Select is as popular as Mich Ultra, it will be a big big boost to AB.

The point of all this is that while the domestic market is struggling right now, all AB has to do is tread water for a bit. If the fad fades and the upward trending substitution of wine and spirits reverses, Bud stands to gain the most as the industry leader. If not, they have positioned themselves very well to compete in China, a market larger than the US and the explosive potential to be completely dominant. Also, AB has a long history of being a well-run, intelligently managed company, so its not like they haven't had to overcome bleak prospects before (the microbrew explosion of the early '90's comes to mind; everyone was crowing about the death of the macrobrew then, too).

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.

[FishHooks]

Sounds like this guy knows what he's talking about.

[RocketManJames]

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

[AceHigh]

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

P/E is 16.3 and forward p/e is 16, that's very little growth for the immediate future. I'd wait until they start showing some growth before I would jump in.