Saturday, March 20, 2010

St. Patrick's Day week .... you knew I had to write about Beer stocks!

Dow Jones 10,741.98 (UP) week ending 03-19-2010

Warren Buffett loves to buy beverage stocks because they are usually pretty consistent companies for growth and earnings and they also generate a lot of cash. Coca-Cola, Buffett's largest beverage stock holding, does not make a brewed beer so will not be involved in this discussion. Since beer comes in flavors, I am going to give you a Small cap, a Mid cap, and a Large cap selection of beer stocks. Mid cap stocks are generally companies with capitalizations of 1 to 10 Billion dollars. The Small and Large caps fall on either side of that. Get it?

I will start with the Small cap stock The Boston Beer Company Inc., (Symbol SAM , $48.88), with the stock symbol named after its famous Samuel Adams Boston Lager beer. Samuel Adams of course is one of the original Tea Party members in Boston and his cousin, our second president, was the unwavering and eloquent John Adams. The Boston Beer Company did 415 million dollars in sales in 2009 and revenues have grown upward the most consistently over a five year period of any of the beer stocks I investigated. The 12 month Total return on the stock is 134.3%, so this was the best performer that I found that was still trading at a fair purchase price.

The next beer stock, which is a Mid cap stock with 3 billion in sales in 2009 and 4.77 billion in sales in 2008 is a "buy one get one free". Molson Coors Brewing Company CL B, (Symbol TAP, $43.36),
This stock gives you ownership of the whole Molson line of beers along with the Coors and the popular Coors Light lines of beer. The stock has a low PE of only 12 and offers a 2.21% dividend to add to your investment return. The 12 month total return on the stock was 29.3%. The earnings for the last quarter was 78.95% higher than the same quarter last year. Annual sales have trended up from 2005 to 2007 then have trended down since then, so you want to keep an eye on quarterly revenue numbers. Molson Coors Brewing Company boast 350 combined years of brewing heritage and offers some of the world's most popular beers with a respected product portfolio that includes nearly 40 distinct beer brands. Molson's Coors key to success is to get these brands to penetrate and expand into more global markets.

The last stock, the Large cap stock, is Diageo PLC ADS (Symbol DEO, $66.06), the owner of Guinness Draught beer and other international brands did 15.334 billion in sales last year. The London based company trades as an American Depositary Receipt on the New York Stock Exchange. An American Depositary Receipt (or ADR) represents ownership in the shares of a non-U.S. company that trades in U.S. financial markets. Diageo's earnings per share for 2010 is projected at $4.62 per share and for 2011, $5.05 per share. 12 month Total Return for the stock was 52.9%, which is excellent for this large of a company. The annual dividend is 2.77% and the PE on the stock is 14.30. Diageo also has many famous non-beer lines including José Cuervo, Captain Morgan, Tanqueray, Johnnie Walker, Baileys, Smirnoff and J & B Scotch. So this well diversified company looks pretty good.

So, Sláinte! "To Your Health!" in this St.Patty's week and raise your pint to beer stocks!


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