Shopping around is a foundation of smart investing. Independent research allows investors to go beyond the stocks featured in the news and shop lesser-known alternatives. As simple as it sounds, you are better off shopping around than using the media as a filter that selects for familiar or popular stocks.
Companhia de Bebidas Das Americas (ABV) or AMBEV is a Brazilian beer and non-alcoholic beverage bottler. It licenses and bottles familiar brands like Budweiser and Gatorade for marketing across the Western Hemisphere. Its success and status as a household name make it one of the most researched stocks on the web. Should investors restrict their research to stocks like ABV because of recognizable products and well-publicized success?
No. On the contrary, investment returns are ultimately dictated by financial performance, not fame. Regardless of the buzz surrounding AMBEV, its earnings and future cash flows will determine its value. The future financial potential of a stock can be gauged by using metrics to determine how cheaply a stock is priced, its ability to weather hardship, and its growth potential.
Instead of ABV, consider the following stocks which offer better investment prospects:
Alpha & Omega Semiconductor, Ltd.
Semiconductor - Specialized
Avago Technologies Limited
Semiconductor - Broad Line
Chicago Bridge & Iron Company N.V.
Drug Related Products
Entertainment - Diversified
Potash Corp. of Saskatchewan, Inc.
Companhia de Bebidas Das Americas (AMBEV)
Beverages - Brewers
Like AMBEV, these seven alternative stocks are all categorized as "safe" according to the Altman Z-score, indicating that they are not considered bankruptcy risks. Moreover, AOSL, AVGO, CBI, G, HLF, IMAX, and POT trade at lower price-to-earnings ratios, which indicate that they are cheaper than Google (NASDAQ:GOOG) at current market prices.
But what about growth prospects? Each of these alternative stocks has grown earnings more in the past five years and is expected by analysts to grow earnings more than ABV in the next five years:
EPS growth past 5 years
EPS growth next 5 years
There are many attractive international stocks besides AMBEV. Moreover, AOSL, AVGO, CBI, G, HLF, IMAX, and POT are better bets for stock investment both on the basis of cheaper valuations and greater earnings growth prospects. Rather than restrict yourself to concentrated investments in a familiar stock, consider a diversified mix of these seven securities as a more attractive alternative.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: This research is NOT a guarantee. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.
This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner.