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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: hoyasaxa who wrote (19065)	4/17/2004 11:46:41 PM
From: Paul Senior	Respond to of 78661

hoyasaxa, re: HINKY. I check it once in a while. Always seems too high-priced to me. OTOH, could be a bargain alternative to BUD.

To: hoyasaxa who wrote (19065)	4/26/2004 3:39:01 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78661

HoyaSaxa, reflecting a bit on your idea of HINKY which spurred my look at BUD, I decided I do like BUD around current price. Of course BUD is the dominant American brewer with about 50% market share. I was surprised to notice that BUD hasn't really participated in the market rally of the past year, finance.yahoo.com yet there's been no glitch in its string of good performance numbers. Price to book is outrageous (high), and price to sales is high at under 3. Certainly a current p/e of 21 doesn't indicate any bargain. It seems, further, that profit margins which have moved up from about 8.6 to 14.7% over the decade are now back down at a bit over 12%. Putting those numbers in some context, Bud's average p/e has been over 21 from '98 to '03 (but about 19.8 in '03), and its psr has averaged over 3 in '00 through '03. The forward pe estimate (per Yahoo)is 17 - that would be a number not seen as an average since '95-'96. BUD has had eight years of consecutive earnings growth and 22 consecutive years of dividend increases. Perhaps BUD is in the process of receiving a permanent p/e revision (down). On the one hand, I'm not surprised; I've suspected the beer market is saturated (-g-, sorry). OTOH, I remember studies in '71 that said that (& that kept me out of beer stocks), and BUD has done just fine since then. I see now that some value type investors have positions in BUD, and they may have started those somewhere around the current price. (Nygren of Oakmark Fund, Eby of Torray.) I will bet that Bud will continue its dominance, that regardless of inflation or deflation beer drinkers will drink (and BUD will supply them world-wide with its diverse brands and various brews - low carb, etc), and that at some point, good profits, good profit margins and other good numbers will attract people (more funds) into the stock, and a 24 p/e number might return. It's my guess that unless the market crashes, if a person wanted to be in this brewer, somewhere around the current price is a reasonable entry point. Jmo, and I've been very wrong on beer stocks before (sold RKY too soon, failed to buy LQU too many times), and I could be very wrong again. Paul Senior I've placed an order for a very small amount on Monday.