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Turn your Nasdaq trash into cash! Dive into the Nasdaq dumpster and capture 50-100% profits in just a few days. Don't get left behind! Click here for your FREE special report: "The Next 5 Monster Stocks of the NewTech Era" http://www.changewave.com/a/11/sos27 ***************************************************************** SIVY ON STOCKS from money.com November 27, 2000 The king of beers Investors searching for defensive stocks are rediscovering the appeal of a good brew. Anheuser-Busch looks like the top pick in the group. By Michael Sivy When the stock market gets rocky, many investors turn to drink. Historically, buying shares in brewers has been a good way to play defense in uncertain times because beer consumption is hardly affected by fluctuations in economic growth. That hasn't counted for much during the 1990s boom, however. And the brewers have had bigger problems, too -- specifically, growth has gone flat. But that's all changing. A rotation in stock-market leadership (away from momentum and into value) and shifting demographics could lead to better times for all the U.S. beer makers and Anheuser-Busch [BUD], maker of Budweiser, in particular. Because of their high fixed costs, beer-makers' profits are highly sensitive to very small changes in volume. And for the past two decades, sales growth by volume has been terrible. Per-capita consumption is down to less than a beer a day, a drop of nearly 11 percent since 1980. No one will be surprised to learn that young adults are the most enthusiastic beer guzzlers. In fact, though 21-to-27-year-olds account for only 14 percent of the population, they put away 27 percent of the beer consumed in the U.S. During the 1990s, the number of Americans in that age bracket declined from 41 million to 36 million. But over the next few years, their ranks will rise to around 38 million. That bodes well for all brewers, but Anheuser-Busch may be best positioned to capture the growth. As in the movie business and the magazine business, success in the beer game depends on control of distribution. And Anheuser-Busch is not only the biggest brewer, it also has the tightest grip on its wholesalers. Distributors in more than 75 percent of Anheuser-Busch's markets handle no other domestic beer (in 65 percent they don't even handle foreign imports), while wholesalers in less than 30 percent in Miller's and Coor's markets are similarly exclusive. Anheuser-Busch has steadily been improving its profit margins, but the key to double-digit earnings gains will be the expected upturn in volume growth. Per-share earnings growth is projected to average 12 percent annually over the next five years. Combined with a 1.3 percent dividend yield, the stock should offer a potential return to shareholders of at least 13 percent. Since March, Anheuser-Busch has nearly doubled to $48 a share, or 25 times next year's expected earnings. With a P/E almost double its projected return, Anheuser-Busch isn't cheap, but it's a solid buy for an investor looking for a top-quality defensive stock. And on any selloff down to the low $40s, the stock would be a screaming buy. ### Post your comments on Michael's column at: http://www.money.com/depts/investing/sivy/index.html To subscribe or unsubscribe to Sivy on Stocks, go to: http://www.money.com/email/ Earning Releases and Calls For the latest corporate earnings releases and online conference calls click on: http://money.ccbn.com * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Special Internet Offer!!! Sign up for a RISK-FREE issue of MONEY MAGAZINE at http://www.money.com/subscribe2 Or if you prefer call our toll-free number 1-800-544-4594 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * We may, from time to time, contact you with offers for Time Inc. products and services which we think may be of interest to you. If you would prefer us not to contact you in this manner, AND YOU DID NOT INDICATE THIS PREFERENCE AT THE TIME YOU SIGNED UP for the Sivy on Stocks online newsletter or any other Time Inc. online newsletters, please let us know by sending us an e-mail at <no_solicit@money.com<. Additionally, from time to time we may provide your e-mail address to carefully chosen companies whose offers we think may be of interest to you. If you would prefer us not use your e-mail address in this manner, AND YOU DID NOT INDICATE THIS PREFERENCE AT THE TIME YOU SIGNED UP for the Sivy on Stocks online newsletter or any other Time Inc. online newsletter, please let us know by e-mailing us at <no_transfer@money.com<.
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