As the market continues to tumble downward, with the Dow threatening to stay submerged under the 12,000 mark, the S&P falling under 1,300, and the Nasdaq reaching a 17-month low this week, investors are scrambling for what to do next. Many investors simply hold on, while some have taken profits (ideally), or have sold some shares that they wanted to get rid of when the markets were higher, while others are going into a larger cash position. Even traders and momentum players are not immune from having to re-think their strategies. Some have re-deployed funds into the hotter commodities markets, while some are still in stocks but are shorting.
It seems silly now that people were debating whether we were in a bear market or a recession. With the markets down significantly and the economy sluggish at best, along with the underlying subprime crisis still snaking its way through the financial system, it’s clear that at least in the short term the robust bull run of the markets has been quelled. Bold traders will probably still find things to trade in the micro-cap area, while ultra-conservative investors will find Treasuries increasingly appealing. What if you are somewhere in the middle, that species of long-term investors who wants to buy something? What’s out there?
There are a couple of things you can do. One is to bottom pick, which has risks of its own, as in the financials right now. Beaten down large caps hold value, but it will likely take two or three years at best to recover their share prices. You can buy so-called anti-recessionary stocks, and while there aren’t many that are going to do well in a bear market, there are those that have defensive value and can help your portfolio stem an otherwise larger downturn. These are things like food, energy, and perhaps some discount retailers—things that are difficult for consumers to go without even during belt-tightening times. One stock that not everybody would include in this group, as its product is not exactly a necessity, but a stock that still can be beneficial in a couple of ways, would be Anheuser-Busch Companies, Inc. (NYSE: BUD), better known as Budweiser.
Beer stocks—brewers—tend to do alright in recessions and probably do better on a relative basis in bear markets than many stocks. While that may seem thin gruel served at what was once the bounty table of the markets, having some stocks that thump along steadily while your other high-flyers are plummeting and burning your portfolio up, might not be a bad thing. Anheuser-Busch is the mega-maker of Budweiser and other well known brands of beer such as Michelob and Busch, has twelve breweries, has distribution centers, packaging plants, has branched out into the energy drink business and its Busch Entertainment Group owns nine theme parks.
The company, as you can see, is heavily integrated in its operations from brewing to distributing and related operations. It has a highly efficient, cost-effective operation of making beer and eventually getting it into stores where consumers buy it, take it home and drink it. Anheuser-Busch’s diversification is largely what could be called close-diversification, as they tend to be involved in closely related business to brewing which also stay close to the consumer.
Anheuser-Busch has a market cap of $33 billion, larger than its competitors Heineken (NQB: HINKY) and Molson Coors (NYSE: TAP), they did over $16 billion in operating revenue in 2007 which produced $2.1 billion in net income, has traded in a 52-week range of 46.09-55.10 (and a five-year range of 40-55), pays a dividend of 2.82% at its recent price of 46.22, and trades at a PE of 16.75. Their trailing twelve-month EPS is $2.79, and though income growth has been flat to slow in the last few years, some analysts are projecting its future annual income growth rate at around 7-8%.
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