Entering text into the input field will update the search result below

Brown-Forman: A Baby Boomer Bubble Stock

Jan. 11, 2023 3:21 PM ETBrown-Forman Corporation (BF.B)47 Comments


  • There is a tremendous bubble in the stock market that nobody is talking about, but it will potentially threaten many retirees' investment returns.
  • This bubble has three distinguishing characteristics, which I will discuss in the article.
  • Brown-Forman stock is a poster child for stocks that have attracted many Baby Boomer retirees, but which are likely to produce poor returns over the medium term.
  • Looking for a helping hand in the market? Members of The Cyclical Investor’s Club get exclusive ideas and guidance to navigate any climate. Learn More »
Unhappy man sitting with head in hands. In the background stock prices showing on a light board.

Ole Schwander/iStock via Getty Images


Often when investing, especially if a person is using some sort of fundamental analysis, it takes time for an investment thesis based on valuation to play out. The truth is that the correlations between business fundamentals and stock prices increase the farther

If you have found my strategies interesting, useful, or profitable, consider supporting my continued research by joining the Cyclical Investor's Club. It's only $30/month, and it's where I share my latest research and exclusive small-and-midcap ideas. Two-week trials are free.

This article was written by

Cory Cramer profile picture

Cory Cramer is an award-winning political scientist and a long-only cyclical investor capitalizing on market cycles. He has been investing since the 1990s and still invests his own money in the companies he writes about.

Cory leads the investing group The Cyclical Investor's Club where he shares his unique approach to estimating the fair value of stocks by capitalizing on downcycles for undervalued companies. He teaches 4 unique cyclical strategies, offers a master valuation spreadsheet, and is available to answer any questions via chat or direct message. Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

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.

Recommended For You

Comments (47)

You should realize that retirees need to be in the stock market as it can keep up with inflation, as bonds and cash cannot.
Cory Cramer profile picture
@southbuckeye Sure, but they don't have to be in overvalued stocks.

And right now cash (or close to it) yields over 4%, by the end of 2023 core inflation will probably be below that.

And perhaps most importantly, BF.B hasn't outperformed inflation and isn't likely to going forward, either.
Thanks, I enjoyed the article (I skipped the stock part. I don't have a knowledge about the company). I hope your next article will be what boomers are going to buy or buying.
Cory Cramer profile picture
@alla_al Thanks for reading and commenting. I will certainly consider writing a stand-alone article about this pattern.
Why do you keep commenting on a company you do not want to own?

I own it, and I agree it has gotten ahead of itself. it has always, in my owning it, been more expensive than I would have liked, but how it is very much so. growth has slowed, and the new management is not the same. Maybe the market is harder, I don't know. there is a lot more whiskey being sold now, so perhaps competition is harder.

but here is the thing, I have dripped it since 1998, so selling means a ton of paperwork. so I hold. what is your excuse?
thirdcamper profile picture
@Aggamemnon Don't you find it useful to have authors give critical evaluations of stocks, not just tout the ones they consider buys? Even on ones I own or want to buy, I like to read the strongest counter-arguments to test my thesis. Cramer is a good SA contributor, in my opinion. I find his work useful even when I don't agree with it.
Cory Cramer profile picture
@Aggamemnon Actually, I usually only write about stocks I would consider owning, and this one is no exception. But, the price needs to be right so that I can have a high probability of achieving above-average returns.
The fact of the matter is it's not 1998 anymore. What you paid for the stock is irrelevant today. What matters is what the stock is likely to do 3, 5, or 10 years from now.
@Cory Cramer agreed, to a point. because taxes, it matters about after tax #s, not just %s
I must be doing something wrong. I am terrible in math. I just checked my BF.B stock holding as of 2/272017 against my current holdings and the value of my BF.b stock has doubled since then. I did not buy any shares during the interim period, but I did reinvest all my dividends. I can't figure out my 5 year return since each quarter the number of shares bought were dependent on the then current price.
Anyway, I am not disappointed that my stock value in BF.b doubled in 5 years (isn't that more like a 20% increase per annum?).
Cory Cramer profile picture
@PHILIP MAX Thanks for the comment. That's usually what stocks in a bubble do. How much have earnings per share increased over that time? About 5% per year. Meanwhile, the stock price increased about 12% per year. Can you see how this might not be sustainable?
@Cory Cramer I am not faulting anyone since I told you that the math is hard for me to fathom. Nevertheless, the stock is down about 20% from the recent level of $80 to around $65 today (see, i am not so diligent on price quotes either). Had it stayed at 80, my return would be higher.
Be-it-as-it-may, I was intrigued by your argument that this is a Baby-Boomer stock. I thought that your thesis would rest on the concept that bourbon is good for the Boomer generation, but, not necessarily for the Millennials and, as such, that would have given me a great deal of agita. Thankfully, you spared me that thought.
I am very sorry that I simply do not understand charts and charting and therefore, it was hard for me to follow your argument.
Cory Cramer profile picture
@PHILIP MAX I think the way to think about it is that over the long run stock prices follow earnings. So, if earnings are growing 5-6% per year, then that acts sort of like a gravitational pull for the rate the stock price will appreciate per year on average. Over the shorter term, it might be higher or lower than that, but longer term there is a very close correlation between the earnings growth rate and the stock price growth.
freebird588 profile picture
thanks. I think you value PEG, but have you written anything about PEG? And what about PEGY?
Cory Cramer profile picture
@freebird588 I do value PEG as a shorthand way, but a person needs to make sure the earnings and the earnings growth assumptions are reasonable going forward into the future. Also, sometimes certain stocks can stay perpetually overvalued and the sentiment mean reversion helps to identify that and account for it in certain situations. That isn't incorporated into PEG. Also, I like how the CAGRs, even though they are most for valuation purposes can be compared to bond yields or other yields if one wishes and how the time frame of 10 years is specified.
So, I like my method a little better than PEG, even though I think PEG is probably the easiest for many investors to use.
I'm not sure about PEGY, since I haven't used it.
freebird588 profile picture
@Cory Cramer
Thank you very much, Cory. :)
aida2003 profile picture
Cory, Is DEO also a SELL at this time and as grossly overvalued as Brown-Forman?
Cory Cramer profile picture
@aida2003 I have DEO's 10-year CAGR estimate at 5.60%, so it's a little better, but not super attractive. I usually describe that as overvalued, but not necessarily a clear 'sell'. The main difference is DEO's forward P/E is about 22, so its valuation is more reasonable even though its growth is pretty slow as well.
thirdcamper profile picture
So true that this thing is overvalued, but you're going to get in trouble with its fans. I have circled around it, wanting to buy it, and always, always concluding it is overvalued.

I suppose the one question is how you are so sure it's baby boomers buying this stock, as opposed to the whole market that they dominate. Whiskey has had a boom among millenials too, I believe. Who knows what demographic buys particular companies. Mostly very hard to know.
Cory Cramer profile picture
@thirdcamper That's a good question. My theory for the reasons could be wrong, but that still wouldn't affect the fact the valuation is too high to produce good long-term returns from here.
Wesley Pehling profile picture
@Cory Cramer The multiple could remain the same while earnings continue to grow.
Cory Cramer profile picture
@Wesley Pehling Yeah, that's what it has basically done the past 3 years or so. It is very possible that a stock like this essentially goes nowhere for a decade.
Mick Research profile picture
Nice article Cory.
What would you do with excess cash such as that raised selling overvalued stocks?, short term bonds or an ETF such as VOO or similar (RSP has done better than VOO, for example).
The reason why I am asking this question is that quite a few "experts" argue that inflation has already peaked, and that the recession, if any, will be pretty mild.
Cory Cramer profile picture
@Mick Research Right now my excess cash...about 1/4th of my investing money, is in iShares Treasury Floating Rate Bond ETF (TFLO).

As for the macro, while I'm bearish on the overall market this year, I am actively buying positions I find attractive, and have bought 4 new stocks already this year, but they use my growth strategy which I don't write about publicly.
Play Your Best Game profile picture
@Cory Cramer Good piece, interesting analysis and concept. Thanks for writing it.
Cory Cramer profile picture
@Play Your Best Game Thanks for reading and commenting. I think this is going to be a running theme this year.
Play Your Best Game profile picture
@Cory Cramer Re "I think this is going to be a running theme this year": Do you mean for stocks this year, or for your articles this year?

Also, I thought the 32 P/E you selected was kind of recent/short-term and high. Is that your middle-of-the-road forecast?
Cory Cramer profile picture
@Play Your Best Game No. That is based on the average since 2015 and I think I'm being very generous to bulls using that average P/E. Since I knew it was going to be a bearish article already, I didn't bother adjusting for it, but I think a P/E of 16, or half that, is more appropriate personally.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About BF.B

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on BF.B

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.