Sell in May and go away? Not this year, when the markets hit all-time high after all-time high.
Until a couple of weeks ago, it looked as though — unlike the past three years — 2013 wouldn’t repeat as a “sell in May” year. As recently as mid-May, the fast-climbing stock prices in the U.S. and much of the rest of the world were just hitting their strides.
Then everything started to change, even for global-focused investors, as we’ve seen during this week’s three-day (so far) sell-off.
Is the “fantasy”-based rally, as Euro Pacific Capital CEO Peter Schiff calls it, screeching to a halt … or does the global economic recovery still have merit? Either way, it’s a good time to add some defensive positions as buffers against a bigger correction or a possible bear-market phase.
And there’s one industry that always seems to pick up steam (or, in this case, foam) when markets find themselves down on their luck …
Double your money on these blue chips
in less than a year?
I’m not one to believe in secret market timing tools or any other type of holy grail investing secret.
But at the same time, I can’t deny that my friend and colleague Tony Sagami does seem to be on to something with his ABR stock-market indicator, which he used in May to lead investors to an average 55% return in four separate money-making opportunities:
Plus, he tells me he’s getting ready to ring the register yet again!
I’ve asked Tony to tell you how this indicator works, and how you can start using it in your own portfolio. Even if you’re a skeptic like me, the presentation is relatively short and totally free.
All the details are in this special presentation he put together.
First came doubts about the pace of China’s economic growth … then the success of Japan’s efforts to truncate its decades-long deflation … and finally the seeming immortality of the Federal Reserve’s money-printing spree.
Now, Tokyo’s Nikkei has in recent sessions been jolted by huge swings — mostly downward — of as much as five percentage points a day. The index just touched a six-week low (down 15%) after reaching a five-year high last month.
Key Asian markets in Hong Kong and Shanghai have become stagnant, and U.S. investors have been subjected to day after day of 100-point-plus swings in the Dow Industrials.
To make matters worse, more of those big swings have been down rather than up.
But not all stocks are feeling the pain. In fact, you could say some of them are filled to the brim with potential, even in a down “draft”!
Turning to ‘The King of Beers’ … Stocks, That Is
Finding a safe place to hide from stock-market weakness isn’t a slam-dunk, thanks mainly to Federal Reserve moves that have all but eliminated any meaningful returns on fixed-income vehicles.
So where can investors park some assets where they might not suffer from a stock-market hit?
If you ask some Wall Street veterans, a few are likely to come up with beer as a refuge. Not the liquid (although many likely have no aversion to that), but rather the companies in the industry that brew the foamy beverage.
One major data service describes beer brewers as being in the “Consumer Defensive” sector. That’s because this defensive strategy has been around for a long time … and it works.
Beer is among the least-expensive of alcoholic beverages, so consumers of expensive wines and distilled spirits who fall on hard times will save by turning to beer.
Plus, judging by the less-than-encouraging jobs numbers, you can imagine that for those with unexpected (or ongoing) free time, enjoying a beverage could offer a pleasant distraction.
For investors, adding the stocks of today’s top brewers could provide a longer-lasting effect. Even better, you can still feel great in the morning by indulging in stocks instead of (or in addition to) the draughts!
5 Stocks for Bubbling Beer Profits
In my Global Trend Trader service, my subscribers have seen some nice returns from buying into the beverage-makers, ranging from microbrewers to the king of the hill. Today let’s look at five brewers that you’ll find easy to remember because of their tickers.
What these companies have in common is the expectation that they can grow their earnings faster than the U.S. can expand GDP. In fact, analysts predict average annual EPS growth comfortably in the double-digit percentages for three of them.
In the key measures of market cap, revenue and net income, the others pale by contrast with the world’s undisputed champion brewer, Anheuser-Busch InBev (BUD). At $92 and change, BUD can make a break for the triple-digits quite easily in the coming months.
Although headquartered in Belgium, many still associate BUD with the original Budweiser headquarters in St. Louis. These days, the real control originates with a group of super-aggressive Brazilians who now dominate BUD’s board of directors.
BUD isn’t just the world’s biggest beer firm; it’s also the one with the highest gross and net profit margins of the five in the table. Rich margins (58.6% gross and 18.2% net) should provide a buffer even in difficult economic times.
The Busch family is now essentially out of the picture at its namesake firm. But it’s a family affair at Molson Coors Brewing Co. (TAP), where Andrew T. Molson is chairman of the board and Peter H. Coors serves as vice chairman and executive director.
With unusually loyal consumers of its popular Canadian and U.S. brands, the firm’s offerings also include Miller beer, although no Miller is represented on its board.
In addition to its solid customer base in Canada and the U.S., Molson Coors also operates in the beer-thirsty regions of central Europe and the U.K. It’s a $49 stock but this increasingly global brand stands to run even-higher.
But if you’re into more-specialized brews, you can look toward a brewer whose headquarters is apparent in its name …
Arguably the nation’s most successful “craft brewer,” Boston Beer Co. (SAM) markets its beverages under 50 labels that include names such as Twisted Tea and Angry Orchard, in addition to a number of variations of its original Sam Adams brand.
It’s a little pricier than BUD at just under $153 a share, yet I believe there’s a lot more potential bottled up in this name.
But perhaps the best ticker of this batch of brewers belongs to a lesser-known company, Craft Brew Alliance (BREW), with breweries on both U.S. coasts.
Although the microbrewer’s shares change hands at the loftiest P/E ratio of the bunch, analysts anticipate a blistering annual growth rate of 20% over the next half-decade.
If BREW makes good on that outlook, current investors (at just $7.50 a share) who hold on for the long term stand a chance for big rewards.
Just a quick word of caution: Craft Brew Alliance is such an interesting brewer than I couldn’t resist putting it on the list. But BREW is still small, relatively new and should accurately be considered somewhat speculative.
It really isn’t what should be considered a hedge against stock market turbulence. However, let me give you another name that better fits the “consumer defensive” label … on a truly global scale.
This one isn’t on our short list here, but that doesn’t mean it isn’t well-represented by another company that did make the cut.
Domiciled in the super-aggressive business metropolis of Sao Paulo, Brazil, NYSE-listed Companhia de Bebidas das Americas (ABV), which you may know as “Ambev,” dominates the beer business in Latin America and the Caribbean, including Cuba. And just to show that the firm doesn’t discriminate geographically, it handles the popular Labatt’s brand in Canada.
In a sense, Ambev is already represented in this list, as it is 61.87% owned by Anheuser-Busch and managed by many of the same Brazilian tigers who steer BUD’s fortunes.
Anheuser-Busch CEO Carlos Brito is co-chairman of Ambev and BUD’s executive board member Castro Neves is Ambev’s CEO. So anyone investing in BUD also has a certain stake in Ambev.
And finally, rounding out our list is Chile-based Compania Cervecerias Unidas S.A. (CCU). It produces and markets beer and other beverage-related products in Argentina, the Cayman Islands and Liechtenstein in addition to the firm’s home country.
Hot Summer, Cool Profits Ahead?
It’s important to keep in mind that during some economic downturns in other times, brewers might have provided legitimate refuges from the full impacts of bear markets.
But folklore might also be a consideration in mentions of brewers as defensive plays for difficult times.
During the recent Great Recession, the group provided only mild insulation against the bear market. Data on BREW isn’t available, but the four others in the table sank an average of 45%, just less than the S&P 500’s 56% plunge.
While SAM crumbled 62% during the rout, giant BUD retreated only 36%.
What’s interesting about this “consumer defensive” group is that it rebounded strongly after the market implosion, an impressive average spurt for the five of 257% — far outdistancing the S&P 500’s 141% advance.
The craft brewers have come back strongest, with SAM climbing 711% since its 2009 trough and BREW vaulting 727% since it bottomed.
I personally don’t imbibe, but if you relax, reflect on this interesting industry and judiciously sample some of its wares over the weekend (in moderation, of course), perhaps you will be prepared to decide on whether to invest in any of these stocks.
P.S. My colleague, Tony Sagami, has recently gone public with a stock signal he’s uncovered. Amazingly, this signal has shown — over three years — an accuracy of 85%!
That’s means, better than 8 out of 10 times you put money into a stock… you got richer!
But Tony found a way to juice up his returns. Just in the last 12 months, you could have had the opportunity to make gains better than 600%… five different times!
He’s revealing all the details in his new breakthrough presentation.
I urge you to click this link here and watch it immediately. It could be taken offline at any moment, without notice.
As with all other proprietary trading strategies, it’s important to keep it under-wraps.
Tony only wants to share this secret with a handful of Uncommon Wisdom Daily readers.
So again, click this link now before he takes it offline.