It's that time of year, as summer ends and fall begins its time for football. I love fall and I love football. To paraphrase a television commercial, "there are two seasons in my house, football and getting ready for football." With football season getting started I thought now would be a great time to take a look at a few stocks that often come to mind when I am thinking sports, and football in particular. These would be a few companies that produce beer and chicken wings, the American classic that goes down perfect with sports.
Beer brewers Anheuser-Busch Inbev (BUD), Molson-Coors (TAP), and Boston Beer (SAM) have vastly differing valuations. BUD is an international beverage conglomerate responsible for brands like Budweiser, Corona, Stella Artois, and Becks. TAP consists of brands like Molson, Coors, and Blue Moon. SAM is responsible for providing the Samuel Adams line of beers.
As you can see above shares of SAM appear to be the most expensively priced, and shares of TAP appear to be the least expensive. However, when we dig deeper into these stocks and look at EPS projections going forward it becomes clear why. Over the next 3-5 years EPS for Molson-Coors shares are expected to grow only 4.5%, well below the market average. While shares of Boston Beer and Anheuser-Busch Inbev are expected to grow 25% and 33.5% respectively over that same period.
Based on reviewing the complete financials of the three companies, BUD and SAM both appear to be sound investments for the future. They have high growth projected over the coming years, however I would look for better entry points for both. The dividend of BUD certainly is appealing to me, especially with expected earnings growth so I would look to add shares of BUD at or below $77. SAM also offers the opportunity for growth as it's earnings increases, and possibly takes market share from the bigger companies like BUD with a better product. I would look to add shares below $100. TAP is a solid company with sound financials, however the company lacks the growth to represent a great investment opportunity.
To go with all that beer how about some chicken wings? This comes down to the battle of make at home with Tyson Foods (TSN) versus going out for your wings with Buffalo Wild Wings (BWLD). Obviously this not exactly an apples to apples comparison given that these two operate in different industries, with BWLD being a restaurant operator versus TSN who is a food production company.
Shares of Tyson appear cheap after a high level review of the financials. It offers a low yielding but safe divided, and is available at low P/E ratio. EPS growth for the next 3-5 years is expected to be 55.2%. If TSN can reach those growth estimates, it offers a fantastic investment opportunity. TSN is somewhat susceptible to increases in commodity prices, but they can pass some of those increases along to the customers. For BWLD earnings are expected to grow at 25% for the next 3-5 years. This is still exceptional growth, but the higher P/E, lack of dividend, and increased susceptibility to commodity costs would lead me to think twice about an investment in BWLD at this level.
I believe Tyson Foods offers an intriguing investment opportunity. The shares appear to be undervalued at their current level, and offer a small dividend to tide patient investors over until the market recognizes the true value of the company.
All in all fall is upon us and it's the time of year when nothing tastes better on a Saturday or Sunday then hot wings and cold beer. From an investment perspective I would look too add some Tyson Foods and a nice cold Budweiser for both my portfolio and my stomach. Consistent dividend income from BUD and the potential for price appreciation with Tyson Foods provide a recipe for investment success in my opinion.
Again, as stated above I would look to add shares of BUD at or below $77. TSN appeals to me as a value play. With it's low P/E ratio, ability to pass increased commodity prices on to customers, and a small dividend yield I believe TSN has the ability to reach above $20 a share over the course of the next six months providing investors with a return of nearly 25% before including accumulated dividends.
Buffalo Wild Wings is a great restaurant, I have watched my fair share of sporting events from the tables of their establishments. Shares of BWLD have rewarded investors with an increase in share price of nearly 25% over the past 12 months. The company has expanded rapidly over the past few years, but I believe the company faces a number of headwinds at this time that will limit growth in the short term. With this being said I would avoid additional investments in BWLD at this time, but continue monitoring. If management is able to show that they can continue delivering double-digit earnings growth in the face of these headwinds I could easily be convinced that BWLD is a stock for the future.