Sunday, December 9, 2012

"Fiscal Cliff, ObamaCare, Alternative Minimum Tax, Mayan apocalypse, Governments broke, Unemployment, it's all enough to drive you to drink, and drink they do"

Dow Jones Industrial Average 13,151.13 (UP)  Week ending 12-07-2012

“In wine there is wisdom, in beer there is Freedom, in water there is bacteria.” 
― Benjamin Franklin

“Here's to alcohol, the rose colored glasses of life.” 
― F. Scott FitzgeraldThe Beautiful and Damned

Oh, will we ever make it through the next 6 months, or in the case of the Mayan calender and the pending apocalypse, the next 14 days? We can't predict what events will take place. What we can predict though is that in all cases, people will be drinking.

Warren Buffett and Charlie Munger love beverage stocks because they are great machines that generate a lot of cash.
The first stock I want to look at can also generate a great Black & Tan beer combo.

Diageo PLC ADS (Symbol DEO, $120.45)  Return on Equity 39.06%  PEG Ratio 1.47

You can see in the picture above that Diageo makes some of the great drinks of the world. DEO just squeezed in under my PEG ratio limit of 1.50 and is a little rich here but well worth it. 2013 fiscal year earnings are projected at $6.59 per share and for June 2014, $7.35 per share. Diageo, based in London, UK., has a 5 year average sales gain of 6.61% annually and 5 year earnings growth of 6.29% , not earth shattering but steady numbers. 
Projected Long-term EPS is 12.57%.

The really nice holiday cheer in this stock is the 12 Month total return of the stock of 41.17% and a 3 year total return of 87.09%.  (That will buy you a bunch of Captain Morgan Rum, Aye.)

Well, now I am off to my next pick which is:  

Anheuser-Busch InBev N.V. ADS (Symbol BUD, $87.75)  Return on Equity of 19.33% and PEG ratio of 1.25

BUD, the great American icon of beer and beer advertising, has had 5 years sales growth of 18.65%. Budweiser has merged together with dutch brewer InBev N.V. , and has continued their dominance of the US beer market. 2012 earnings are projected at $4.63 per share and 2013 earnings of $5.08. The projected long-term EPS for the company is forecasted at a very healthy 14.73%. 2011 yearly revenue sales were 28 billion for the company and looks like it will be $31-32 Billion for 2012. 

In-Bev N.V. has quickly been paying off the debt burden it took on to buy Anheuser-Busch , and the balance sheet seems to be in good shape and manageable. The most important thing though is that the 12 month total return on the stock is 47.93% and the 3 year Total return on the stock has been 72.40%. 

Both of these stocks can be purchased here and tucked away for next year.

 Two other beverage stocks you could also look at are Boston Beer Company (Symbol SAM) and Coca Cola (Symbol KO).

So don't end up like this guy on the E-Trade commercial with the surprised baby, trying to win your retirement with lottery tickets, (one of my favorite commercials by the way). Instead, buy some cash generating beverage stocks and keep them in your stock portfolio.


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