Looking for a Great Foreign Stock? This Bud's for You
Our search for great stocks from around the world led us to Belgium, home to the world's biggest brewer.
We went looking for the greatest companies outside the U.S. and came up with eight proven picks. Here's one of them: Anheuser-Busch InBev (symbol BUD). To make the list, the businesses had to have U.S.-traded shares and be industry leaders. They also had to possess substantial financial resources to weather rough economic times. Finally, we sought companies that had significant catalysts to drive the next phase of their growth.
Read more about the case for investing in AB InBev below. Prices and related figures for U.S.-traded shares are as of August 23. Earnings estimates are for calendar 2016 and 2017, unless otherwise noted. Price-earnings ratios are based on estimated 2016 earnings, unless otherwise indicated. Also, take a look at seven more great stocks from around the world.
Headquarters: Leuven, BelgiumShare price: $126.45Market capitalization: $203.3 billionEstimated earnings per share: 2016, $3.70; 2017, $4.77Price-earnings ratio: 34P/E ratio on 2017 estimate: 26Dividend yield: 3.6%
The business: Anheuser-Busch InBev is the world's biggest brewer, formed when Belgium's InBev bought Anheuser-Busch in 2008. Now AB InBev is buying its main rival, SABMiller, creating a titan that will own almost 30% of the global beer market, with more than 200 brands, including Budweiser, Corona, Foster’s, Miller, Peroni and Stella Artois.
Track record: Despite a weak global economy and competition from the craft beer trend, AB InBev delivered strong growth from 2010 through 2014. Sales rose from $36 billion to $47 billion, and earnings per share rose from $2.50 to $5.54. Wall Street loved the story, and the stock more than doubled. But in 2015, the growth streak ended as sales weakened and volatility in currency exchange rates squeezed profits. This year brought more woe, as recessions in Brazil and Argentina — two of AB InBev's major markets — took a toll. Overall, second-quarter profits slid 13% from the year-earlier period as the total amount of beer sold fell 1.7%.
Reasons to own it: Despite this year's earnings slump, the stock is hovering just below its 52-week high. Wall Street expects SABMiller to fuel another growth streak for AB InBev, as it adds a slew of beer brands while slashing costs. What's more, SABMiller is dominant in Africa, where the volume of beer sold is expected to grow at three times the global rate over the long term. Analysts on average expect AB InBev's earnings to rebound from $3.70 per share this year to $4.77 in 2017. That would leave the stock highly valued, selling for 26 times estimated 2017 profits. Bulls argue that that’s a reasonable valuation given the company's premier brands, growth outlook and the stock's 3.6% dividend yield. "We believe the dominant global brewer deserves to be a core holding for long-term investors," says CLSA, a Hong Kong-based investment firm.