I think this one fits the recommendations for how to invest in emerging markets now that I laid out in my post https://jubakpicks.com/2010/01/07/how-to-buy-into-emerging-market-stocks-now/
AmBev, or to give the company its full name Companhia de Bebidas Das Americas (ABV), is the largest beer company in Brazil and the fourth largest beer company in the world.
Its 70% market share in Brazil gives it huge exposure to growth in that country’s domestic economy. And Brazil isn’t a bad beer market to dominate. Beer consumption is forecast to grow by 22% in Brazil from 2008-2015, which ranks Brazil as the second fastest growing beer market in the world behind China.
Through its 100% ownership of Quinsa, AmBev sells the leading brands in Argentina, Uruguay, Paraguay, and Bolivia. AmBev owns Canada’s Labatt. The company is also the largest Pepsi bottler outside the United States, which gives AmBev huge volumes to feed through its distribution system.
Those volumes plus huge market shares plus a rigorous cost-cutting culture have made AmBev one of the most profitable beer companies in the world with a huge 37.8% core operating margin in 2008. That’s 15 to 20 percentage points higher than at competitors, according to Morningstar.
AmBev is controlled by AB AmBev (AHBIF.PK), the largest brewer in the world. (InBev looks like it will soon acquire full control of Mexico’s Grupo Modelo, which will give the combined companies increased clout in heading off any challenge from Heineken, which has just bought Mexican brewer Femsa. Femsa sells the Bavaria, Sol, and Kaiser brands in Brazil.) InBev owns 84% of the voting stock. The two companies trade as separate public companies. AMBev shares currently pay a dividend of a little more than 2%.
As of January 13, I’ll be adding these shares to Jubak’s Picks with a target price of $118 by October 2010.
Full disclosure: I don’t own shares of any stock mentioned in this post. I will buy shares of AmBev three days after this is posted.
Right, second the motion. I was one of little faith on Ambev. After he picked at like 109, it tanked and I sold off half but kept half so at least I can now imagine breaking even or maybe better. Jim’s fundamental approach paid off.
Boom goes the dynamite! Thanks for the profits Jim!
I can’t wait to see the time when the:
Quote:”…a limited membership, subscription portfolio on global stock.” …Unquote; will be delivered by Jim to the JJ’s Investors Community.
To trying 2 learn,
T2L, always expect corrections, as they are part and parcel of a healthy stock market.
If you are following Jim, order his book on Amazon. His book lays out his strategy in clear and concise language. It talks about what, why, and how he does what he does, in considerable depth. He is one of a very few (Maybe the only) online investors who calculates his portfolio earnings in an easy to follow and fair way. Unlike Jim Cramer, he does not talk about hundreds of stocks, and then month’s later claim that he “picked” this one a long time ago. Jims picks inhabit a fairly small universe, and when he adds them to his Jubaks picks, or 50 best stocks portfolio, he often buys them for his personal account. And when he does so, he waits 3 trading days before buying so that his portfolio is not skewed by any “pop” in the stock that his blog might produce. And when he says, he won’t buy or sell for three days after his blog, I believe him.
Another thing, you must be consistent. I finally, after months and months of talking to my wife about investing, got her to invest in late 2008, One morning without talking to me, she picked 8 stocks from Jims 50 best, right before the market tanked 40%. She was so disgusted that she lost so much, that she hasn’t bought or sold (Or read Jims Blog) since. That was unfortunate. Had she continued to read Jims Blog and act on his advice (After following up with her own research) she would probably be about even, or up by now. For New years, I bought her Jims book, which she is reading through now. I believe she will shortly be ready to jump in again. Unfortunately, she missed an amazing opportunity over the last year because she wasn’t consistent. Had she followed Jims blog, and done her own research, and not been frightened out of the market, she may have done a lot better. (I know 2008 and 2009 have been MY best investing years to date.) The point is, she should have been consistent, she shouldn’t have gone all in at the top of the market, and she shouldn’t have withdrawn when “the blood was running in the street” (Warren Buffets favorite time to buy.) This type of behavior is addressed in chapter 1 (Or 2, I forget which) in Mr. Jubaks books…
Do not look at Jim as some kind of savant, or guru. YOU have to be involved with each pick that you make, you have to understand the market that your company operates in, You have to understand what can make that market better, and what you have to fear that might make that market worse.
That being said, having Jim around to do a lot of the “heavy lifting” is a god send.
Another thing, Jim doesn’t do market timing very well, he says it in his book, and he says it right here in his blog. However, he is somewhat of a, dare I say “genius”, when he lays out his ideas of what is likely to move the markets, and which segments of the market are the best to be in, and why.
Time and time again, for over 12 years now, I have read a Jubak column, only to see days later a similar article on Bloomberg, or Reuters by somebody else, that almost word for word, echo’s Jims thoughts, and then a few days later, Jim Cramer picks it up, and then it seems, everybody starts to talk about the same ideas… I don’t know how Jim does it, but this blog is a great place to be if you’re Trying 2 Learn.
(Jim you owe me $50 bucks.) Please apply it to my first month’s subscription to JubakPicks…
Beer is a staple in my diet!
Part of my thinking on buying AmBev now based on what I’ve seen from some big money investors who are looking to go more defensive now is that AmBev might actually be a beneficiary of emerging market volatility–as long as it’s not too much–as investors who want to stay exposed to a market such as Brazil decide to do so with less risk by buying a consumer staple. (And please no cracks about my calling beer a staple. It just is.)
I’m in. Dollar averaging began today at $103. My bet is that your right on the $118 by October 2010. While I’m not bullish on the US stock market, I don’t believe in predictable motions – everyone who posted is planning for a pullback during the next few months….then they’ll buy. Where have I heard that before? Timers beware! The entire street is expecting this pullback, which is why it won’t happen in the manner or time that people think. A more likely scenario for the US is a prolonged range bound market waiting for a catalyst up or down to set off a trend none of us expect.
I love this pick Jim. By the looks of things everyone else here does too. A well run company, in a growing, commodity rich country that has its financial house in order. Strange as it sounds, to me, picks like this will be safer than treasuries in the future. Everyone wants to wait on this one, but I dove in. If it does fall, I’ll buy more. I think Brazil is a great place to look for stocks. I was reluctant to sell BRF when you advised us to sell, but did so anyway (thanks for the stock pick). I’ve held EWZ for a little over a year and it’s been a good pick as well.
I’d agree on waiting to see a little more of the mkt flush out before jumping in on AmBev, I’d like to see it hit 98.50 as a trigger point. It’s hard to go wrong with beer….when ppl are happy..they drink beer…when ppl are sad…they drink beer. And when you’re in S. America…it’s safer to drink beer than the water, at least your bowels will thank you for it.
Good company…good product…..good stock. Surely it’s going to have a correction at some point, but it may very well be a 15% correction after it goes up 30% from where it is now. Dollar cost average your way in over the next few months and you’ll be fine.
Sorry StevetheHawk but your logic behind never buying stocks with a P/E over 20 is just plain silly as you give no consideration to a company’s growth rate.
This is expressed as a PEG ratio and is quite useful in evaluating the appropriate P/E level for a stock.
I concur with most of the other readers that this stock is a good Company, but over priced at these levels. A more interesting investment would be CCU which is a siimilar Company, but based in Chile with business in Argentina. Only a 13 PE which I guess is because of the Argentina exposure which scares me to no end.
Ironically, Jim’s “wait three days” could end up being the perfect time to buy this stock. If the market keeps doing what it did on Tuesday, it may get the downside correction out of it’s system in time to make ABV a good buy for Jim.
Jim, you’re a sly devil, but I see your game.
By the way, I am surprised you didn’t put more emphasis on the dividend. While a 2% dividend (I calculate it at 3% based on it’s last closing price, but that’s splitting hairs admittedly) is normally nothing to cause me to buy a stock, I think it’s that last straw that makes me want to buy this one. Otherwise, the growth doesn’t justify the current P/E.
I want to see this one drop below $100, maybe even closer to $90, before I buy it.
lots of market timers up in here, good luck!
Jim, I like the pick, bought it last week. When there is a dip, big or small, i’ll be adding to all my positions. Thanks for the good work!
@trying 2 learn – what others are saying is that given the huge/longish run up, the market looks tired and possibly ready for a pull back. No body on earth can predict anything with certainity as far as timing goes, so Mr Market could go another 3 months and then pull back. However, its almost a given that it will pull back, just the timing (and hence the level from which it pulls back is not known. Always invest in steps so you enjoy the upside if it goes up, but limit your downside and have some $ in the pocket to take adv of the situations. Just my 2c opinion, FWIW. good luck.
Love this pick, but hate the timing…I agree with the rest of you, markets esp emerging are due for a healthy correction…then I will add ambev.
” a fairly large-scale correction in the next 10-12 weeks” and “10-15 point dip” – is this true for the whole market.
I just started my first portfolio with a few recent buy from Jubak’s Picks portfolio.
Am I looking at ” a fairly large-scale correction in the next 10-12 weeks” and “10-15 point dip” right away. Need to be calm.
In this market I won’t buy anything with a P/E over 20. That rules out AmBev for now.
Sorry Jim, I would wait for a pullback. Great company but I would wait to buy it on a 10-15 point dip. It’s had a huge run.
All stand now and raise your flagons
for in the realm of intoxicating beverages and lager
Brazil is certainly not a laggard.
And they bottle Pepsi too.
This seems like a great pick, but my concern is the stock has already enjoyed such a strong run-up. My belief is that the US market will experience a fairly large-scale correction in the next 10-12 weeks. If this happens, do you think this stock would also experience a decline or would be unaffected given that this is not a US-based company?