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Anheuser-Busch InBev: Love The Beer Giant

Aug. 16, 2018 9:35 AM ETAnheuser-Busch InBev SA/NV (BUD)15 Comments
Khojinur Usmonov profile picture
Khojinur Usmonov


  • There's a possibility of higher synergies from AB InBev's acquisition of the world's second larger brewer SABMiller.
  • AB InBev has a massive presence across the world, that continues to grow with 59% of revenue coming from emerging markets.
  • AB InBev is diversified in terms of price and taste, with its High End unit leading the way with both revenue and EBITDA growth.
  • AB InBev is financially much stronger than its peers, with operating margin double of its peers and EBITDA margin highest of major consumer goods companies.
  • Massive debt load is not a concern.

Forgive me, Father, for I have sinned... again. I invested in a sin company, specifically alcohol.

Earlier this year, I invested in a tobacco company and will continue to hold it. This time, I'm investing in another recession-proof company. And this time, I'm investing in a company I'm a consumer of, frequently.

I'm like the 0.00000000000001% of the consumers that use the products of Anheuser-Busch InBev (NYSE: BUD). The company has consumers all around the world, both in developed markets and emerging markets. In addition to their strong global presence, they have a portfolio of over 500 brands with different flavors and price points. With that all, AB InBev has over $100 billion of debt, which is not of a concern.

* = I'm using my mental model of weighted criteria to make this investment decision (don't laugh). The weights show the relative importance of what made me invest. For example, a weight of 25% was a strong reason I invested in the company compared to a 12.5% weight, which was not as much as strong. The mental model changed recently. From now on, I won't be 100% convinced on new investment decisions.

Cost Synergies (*12.5% weight)

After the world's largest brewer company AB InBev acquired the second largest brewer SABMiller for $100 billion in 2016, AB InBev became the 7th largest consumer goods company. The combined company sells a quarter of all beers in the world.

Global Market Share of Beer Companies, 2016. Market share based on Volume Sales Global Market Share of Beer Companies, 2016. Market share based on Volume Sales

AB InBev sells 3x times as many beers than the second largest beer brewer Heineken (OTCQX:HEINY). Such strong distribution will allow the mega-brewer to have a bargaining power over suppliers. The company expects the merger to result in $3.2 billion cost synergies, mainly from procurement and operating expenses. Procurement lowers cost of

This article was written by

Khojinur Usmonov profile picture
Forex, equities and futures trader. FX fund manager. I started trading at 15 after discovering a love for financial markets and research. I like reading financial statements and SEC filings. (Don’t ask me why). These days I write about securities, macroeconomics, real estate, finance, and investment ideas. In addition to running a FX fund, I also trade equities and futures. I run the website www.outofWACC.com where I cover macroeconomics and investment tips. “An investment in knowledge pays the best interest.” – Benjamin Franklin (The face of the $100 bill, of course.)

Analyst’s Disclosure: I am/we are long BUD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

All the data comes from investor relations website, Morningstar, Financial Times, and few websites which are linked in the article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (15)

Initiated a position. Great price, just hope for price appreciation
can anyone confirm the foreign dividend withholding tax on bus for US investors?
17 Aug. 2018
Bud needs to look seriously at selling the Budweiser Beer brand not Bud Light for US sales only. Not sure what that would fetch but the brand is dying in US and the cash could be used to reduce debt and to invest in mkts and brands that have CAGRs not mkt share losers like Budweiser the beer.
crowbarr profile picture
Bud is growing outside America...
that's because worldwide, drinkers want a small taste of America...
never want to do anything that might kill that dream. Be like sending the Clydesdales to the glue factory... bad idea.
Great article! My order went in today.
why would i want to invest in a stock having to make multi-billion dollar acquisitions to stay competitive with startups making microbrew out of trash cans in their garage?
16 Aug. 2018
Free cash flows. Enough said.

As for those startups: most fail. Some are bought up by BUD. A handfrul remain independent. None pose a serious threat to BUD or its industry peers.
SuperPac profile picture
I agree with the author's analysis and reasons for being long Ab-Inbev. I have a modest long position in Heineken too. And while I was at it I acquired some stock of Diageo. I'm going to hold these ones for very long.
TFberynell profile picture
The “Sin Stock Trifecta”! Nice, S-Pac.
SuperPac profile picture
Thank you TFb.

I like the alcohol sin stocks. I also happen to like the military-industrial stocks.
They will pay down debt faster than advertised I'm guessing. They did it before they will do it again!!! This Bud's For You!
crowbarr profile picture
... been long on Bud since 1986..., and happy too.
Stocks for the Long Run profile picture
At current price this stock is a steal if you have a 5+ years time horizon.
SuperPac profile picture
Buy and accumulate Ab-InBev and hold it for long, very long.
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