For Global Investing, this Corona, Molson and Bud's for You!
Jonathan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Even though strong in recent action, Anheusuer-Busch InBev (NYSE: BUD), Molson Coors Brewing (NYSE: TAP) and Companhia de Bebidas das Americas AmBev (NYSE: ABV) still have much to appeal to income, growth and value investors.
While offering many products, each has a focus on beer. In moderation, beer can be considered a consumer staple. It does have its health benefits. These are enjoyed by consumers around the globe in increasing amounts as emerging market countries become more affluent.
For the portfolio of an investor, these companies offer very healthy returns for the future due to this expansion of the consumer class of the world. According to financial columnist Jim Jubak, this will be the most important investing trend of the decades ahead. A recent report from The McKinsey Global Institute of McKinsey & Co., "Urban world: Cities and the rise of the consuming class," predicts there will be one billion more members of the global consuming class by 2025. That is a lot of beer to be consumed by a lot more people. As these will be in urban areas according to the McKinsey report, ease of distribution will be greatly facilitated.
Based in Brazil, Companhia de Bebidas das Americas AmBev is up almost 20% for the last 52 weeks of market action. While a profit margin of 20% is considered to be healthy, Companhia de Bebidas das Americas AmBev has one of 32.30%. While a beer company is not often associated with a high tech concern, the profit margin for Companhia de Bebidas das Americas AmBev compares favorably with the 27.13% for Apple, the 27.09% for Google (NASDAQ: GOOG) and the 31.96% for Microsoft (NASDAQ: MSFT). The return-on-equity (ROE) for Companhia de Bebidas das Americas AmBev is just as compelling. The average ROE for a publicly traded stock is around 15. For Companhia de Bebidas das Americas AmBev, it is 34.59%. Again, that too compares favorably with the high ROEs of Google, Microsoft and Apple.
Molson Coors Brewing sells and distributes recognizable brands ranging from Molson to Coors to Corona from its headquarters in Denver. For value investors, Molson Coors Brewing is selling at a price-to-book ratio of 0.95. For growth investors, the forward price-to-earnings ratio is projected to fall to just 10.72. Income investors will enjoy the high dividend yield of 3.13% with a low payout ratio of just 30%. The historic average payout ratio, the amount of earnings needed to pay the dividend, is around 50%. For Molson Coors Brewing, that means there is plenty of cash flow to raise the dividend.
For Anheuser-Busch InBev, it has been a good year. Year to date, the share price has risen by 29.85%. It recently agreed to buy the 50% of Grupo Modelo, based in Mexico. The profit margin for Anheuser-Busch InBev is over 20%. Earnings-per-share growth this year is 45.16%. Steven Roge of Roge Partners puts a price tag of $95 for Anheuser-Busch InBev, up from the current share price of around $77.50.
Each of these companies knows how to brew up profits for the shareholders. As with Apple, Google and Microsoft, there are robust profits margins, ROEs and low amounts of debt. Anheuser-Busch InBev, Companhia de Bebidas das Americas AmBev and Molson Coors Brewing are all positioned well to profit from the expansion of the middle class in emerging market countries, which is virtually an inexorable force. Even during The Great Recession, the global consumer class still grew. With Europe in a recession and the USA limping along, China just posed a second quarter growth rate of 7.6% as further proof. The shareholders of Companhia de Bebidas das Americas AmBev, MolsonCoors Brewing and Anheuser-Busch inBev should all toast the rising affluence of the consumer class around the world!
jonathanyates13 has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and Microsoft. Motley Fool newsletter services recommend Google, Microsoft, and Molson Coors Brewing Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.