3 Compelling Reasons To Buy This Liquor Company

928 Words2 Pages
Brown-Forman (BF.B), the manufacturer and seller of alcoholic beverages locally and globally, has one of the most intoxicating growth stories. While the S&P 500 index is struggling to post gains, the liquor company’s stock is already up 20.7% year-to-date, driven by strong fiscal third-quarter earnings and improved full-year growth outlook. During the quarter, diluted earnings per share increased 13% to $0.82, surpassing both analysts’ estimates and year-ago EPS of $0.73. Considering the fantastic business, one can find more than few reasons to invest in this stock, but below I highlight three compelling reasons that reinforce the view. Both risk-on and risk-off play The spirits industry has been a noteworthy alternative investment of late. Not only has it consistently outperformed stock market, but also has materially emulated the returns from safe-haven investments such as gold and treasury bonds during the financial crisis. While the value of gold rose 138.3% in the five-year period from 2007 to 2012, Brown-Forman posted a reasonable 75.05% gain in the same period. In comparison, the S&P 500 (^SPX) index fell 11.2%, while the iShares Barclays 20+ Years Treasury Bond ETF (TLT) gained only 36.14% in the 5-year period. Along with industry peers like Diageo (DEO), the alcoholic spirits industry fares considerable better than the broader markets during recessionary and other downturn periods. However, the outperformance is not limited to risk-off periods. Unlike gold – or any other safe-haven investment – the spirit stocks thrive in risk-on periods as well. As illustrated in the chart above, it is for this reason that Brown-Forman managed a 489% return since the turn of the century, compared with lesser returns from gold, ... ... middle of paper ... ...fort, the third-largest selling liqueur, Canadian Mist, the fourth-largest selling Canadian whiskey, and el Jimador, the fourth-largest selling tequila. While Brown-Forman keeps on building innovative new brands that thrive and endure for generations, it will continue to capitalizes on its strong, 25-plus brands portfolio. Final thoughts Consistent growth, new products, growing markets, strong financials, long history of returning cash to shareholders, improved growth outlook, highly regulated industry, and the list of positives just goes on and on for Brown-Forman. However, the three reasons that cannot be overlooked are risk-on/risk-off candidacy, surviving industry-related issues, and brand presence. The combination of these factors is what makes Brown-Forman, one of the oldest and best-known players in its market, a winner, even in tough market conditions.

More about 3 Compelling Reasons To Buy This Liquor Company

Open Document