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09.10.2009 5:32 pm

Should you invest in Anheuser-Busch InBev?

St. Louis Post-Dispatch
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Check out our story in Sunday’s St. Louis Post-Dispatch on whether you should invest in Anheuser-Busch InBev. For about two and a half months, U.S. investors have been able to hitch their wagons to the company through something called an “American Depositary Receipt,” a financial instrument that lets U.S. citizens invest in foreign companies.

Anheuser-Busch InBev controls one-fourth of the global beer market and owns big brands including Budweiser and Stella Artois.

The question is: What are the prospects for the world’s biggest brewer?

We talked to a number of analysts, and most of them recommended the company as an investment. Sure, among laid-off workers and squeezed vendors, the company has made more than its share of enemies recently. But as a pure money-making venture, it’s hard to beat, our experts told us.

“We started to warm up to these guys,” said Craig Hutson, bond analyst at Gimme Credit. “We’ve been very pleased with the progress they’ve made of achieving integration savings. And certainly they’ve paid down debt at a pretty rapid clip. … These are all things that are positive developments.”

Hutson likes the brewers strong cash flows and ready access to credit markets.

CEO Carlos Brito and his team “came in as pretty well-regarded in the industry,” Hutson said. “So far, they’ve proven their worth. They’re pulling the right levers to increase profitability.”

Rob Mann, analyst at Liberum Capital in London, thinks geography is important in deciphering the brewer’s potential.

“What they’ve been very good at doing is getting themselves into markets that really matter,” said Mann. “They care an awful lot about the U.S. and Latin America and China.”

Each market has something to offer, Mann said. The U.S. takes care of today, Mann said. Its beer market is not growing fast, but a brewer can keep steadily raising prices because sales volumes are stable. Plus, Anheuser-Busch InBev can save costs from “synergies.” It all adds up to good profits.

Latin America, meanwhile, “has been a tremendous performer for years,” said Mann. With Brazil discovering oodles of oil, its middle class looks set to expand and drink more beer. Latin America is a play for 3-10 years out, Mann said.

In the longer term, there’s China. It’s a very difficult market in which to turn a profit, because there are too many brewers. But the world’s most populated country is still key.

“It may turn into something, and (Anheuser-Busch InBev) will be there,” said Mann. “You might have to wait quite a long time.”

Something to think about. We invite comments.

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5 comments

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The time to invest in inbred has come and gone………When it was 9 euro after the purchase a/b was the time to buy, you could have sold at 29 euro and made out.Its time now to sit back and watch the ponzi scheme colapse.

— can-man
11:33 am September 11th, 2009

hell yea im investing! and now with a BUD ticker!!

— buuddd
2:30 pm September 11th, 2009

Hey…This sure isn’t the old “Great American Beer Company”. They have cut expenses, jobs, & benefits so much that it may (will) make the company unstable in the marketing of the company. The new guys appear to be so tight with a buck they squeak, and that isn’t the heritage of the Busch family and the company they built (and ultimately lost).

The stock is just a lot harder to own and feel good about now… (there are a lot of folks who will pay a premium for a company that is such a strong contributor to the good of everyone, not just their stockholders!)

— BJ-Bear
9:05 am September 12th, 2009

The fact is that A-B stock was worth having before because it was solid and dependable. Slow to grow, yes, but in return there was some peace of mind in knowing that the company was interested in the long term. Clearly the new company is in the game to make money fast rather than build a strong company for the future, and whatever soul the company had has been sold (just ask someone who works there). So I suppose the decision to invest depends on your outlook: are you in it to make a lot of money within the next couple of quarters? If so, you probably understand the risky nature of your game better than I do. If, however, you’re looking to invest in a company that will be there and be profitable in 20 years, you should look elsewhere. Brito and his sort clearly do not see beyond their ledgers. Yes, it’s possible to lose weight and look attractive by starving yourself, but to do so as a matter of policy can only lead to deep and often irreversible health problems.

— Carl
7:26 am September 13th, 2009

the original inbev started making beer in 1366. i would think that qualifies as long-term. they will still be making beer and yes heaven forbid money on that beer long after we’re gone. in the meantime if they continue to pay down debt as they have so far their stock could go higher. and if the economy improves it will go higher. can you name another company that has a 25% WORLD wide market share in any industry?

— mjd53
3:20 pm September 14th, 2009