Selling the Basics: The Beer Edition
Selling “the basics” isn’t just working for cigarette companies… it’s working for brewers as well.
Regular readers know that when it comes to investing in high-growth emerging markets like Brazil, India, and China, we avoid hot gadgets and Internet stocks. We recommend “the basics” approach of owning dominant global companies that sell things like soda, beer, and cigarettes to these markets. “Boring” products like these enjoy steady demand. After all, there’s scant risk new technology will make having a beer after work obsolete. Plus, well-run companies in these industries generate huge cash flows and dividends.
We often point to giant cigarette-maker Philip Morris International (PM) as one of the best “basics” firms you can own. The stock is a favorite of our colleague Dan Ferris. It has confirmed our basics thesis by registering a 100% return in the past two years.
Today’s chart shows the basics approach is also working for another one of Dan’s favorite companies… global brewing giant Anheuser-Busch InBev (BUD). BUD owns many of the dominant brands in the U.S… and it has a huge “footprint” in many of the world’s fastest growing economies. Thanks to its dominant, steady business model, BUD shares have gained 80% in the past two years. And just yesterday, the stock struck a new all-time high. We state again: Selling the basics isn’t sexy… but it works!