Molson Coors Brewing Company (TAP)

It is an interesting company. If we are thinking about being late cycle, there are a few industries that are recession proof, like alcohol. They have a nice dividend.

She is not a fan right now. There is incredible, tough competition in beverages.

(A Top Pick Nov 3/16. Down 18%.) Hasn’t worked out recently, although his long-term clients have done quite well on this. They didn’t have a very good analysts’ day. Tried to rectify miscommunications they had with analysts. Had a Q2, that was better than what some analysts expected. Thinks it has something to do with what is going on with all consumer packaging goods. He would still make this a top pick.

Has had a huge comeback in the last year or so. It is down significantly, and only yields about 2%-2.5%. These are the types of companies and sectors you like to buy ahead of a recession. If it dropped another 10%-15%, it could be something you could look at.

Had thought the deal to acquire Millers/Coors was very positive. Beer sales are not going to be sexy growers going forward. There is lots of competition. This has underperformed and is at a 52-week low, very cheap. If they execute well over the next few quarters, you could easily see the stock at $100.

This didn’t do anything until it looked like they were going to make an acquisition to assimilate Miller Coors, so now it is a huge company. Wonderful brand. The problem is, beer is not a sexy growth business anymore, so the company is going to be a cost cutter, and hopefully they will be out to get a lot of synergies with their new acquisition. It’s expensive here, and generating a ton of free cash flow. He expects them to reduce debt in the next 1-2 years, and then be in a position to increase dividends or make more acquisitions. There is a 25% chance in the next few years that it gets acquired by Heineken. The stock is worth $125 at least, and maybe $150 if they get the cash synergies proper.

The story on brewing companies globally in the last couple of years, has been the consolidation. The industry is not growing. In general drinking, there has been a switch from beer to wine. Acquisitions have become fewer and fewer, and more expensive. He would be a little hesitant going forward.

With this merger, it is now the 3^rd largest brewery in the world. They have wonderful brands. While beer drinking is not on the rise, this is more of a cost and synergy’s play. By merging, they will be able to rationalize the advertising, marketing and procurements. Meanwhile they are generating significant free cash flow, which he thinks they will use to reduce debt in the next couple of years, and then will start again. If they get it right, the stock could be $150 a share. Dividend yield of 1.59%.

(Top Pick Jun 15/15, Up 44.48%) He saw a lot of value. He thinks there is more to go. It could merge with Heineken.

(A Top Pick Aug 5/14. Up 2.32%.) Facing tough competition from craft brewing, and beer is facing competition from other types of alcoholic drinks. Beer drinking is not going to grow any more but is going to slowly, slowly decline over time. But this company compounds capital. They charge $3 for sugar water and are able to use that to generate a lot of free cash flow to buy other brands and make acquisitions. The jewel in the crown is its 42% ownership in Miller Coors. At some point in time, something is going to have to happen with that joint venture. He is still buying under $70.

This has a hidden asset. At some point in time, the company will either be taken over or be able to acquire its joint venture holdings in Miller Coors. If that’s the case, there is a huge potential of earnings accretion from that. Generating a lot of free cash flow. Dividend yield of 2.3%.

Was a great stock and they have a good European presence but we have probably seen the best from them. They are not gaining much market share.

Over the last couple of years, this has done incredibly well. Trading at 19X earnings with a 2.1% dividend yield. Has a strong franchise in North America and Western Europe, and are not really tied to the emerging markets area. He would prefer Anheuser-Busch InBev (BUD-N) which has a much larger emerging markets business.

Excellent company. For the average retail investor, this is a decent stock. Trading at the high end of its 52 week trading range, and for that reason he would call it a Hold. Good consumer stock. Relatively low growth, but produces good cash flow over time. Good, defensive type stock.

(Market Call Minute.) This would be a Buy on a pull back.