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1. Ab Inbev Stock

The Anheuser-Busch InBev Stock Rally May Be Over, Analyst Says Anheuser-Busch InBev stock (ticker: BUD) is falling on Thursday, following a downgrade from RBC Capital Markets that argues the.

I am CEO and Chief Investment Strategist of Mainstay Capital Management, LLC, a fee-only, independent, Registered Investment Advisor with more than $2 billion under management. I have been ranked by Barron’s as one of the “Top 100 Independent Financial Advisors” in the country for the past eight years and my firm is recognized by Investment News as a “Top 30 Financial Planning Firm” nationwide. I regularly speak at national conferences, conduct educational seminars, and advise thousands of workplace savings plan participants. I am also President and Executive Editor of FIA Publishing, LLC, which publishes the “401k Investor” series of investment advisory newsletters. I have earned a Masters Degree in Management at Stanford University.

As part of my philanthropic activities, I serve as the Executive Advisor and Sponsor for the ENGAGE® Undergraduate Investment Conference, the largest annual student stock pick competition and conference in the world. I also serve as Program Co-Director of the annual G.A.M.E Forum, the largest student-managed investment portfolio competition and conference in the world. I am an Adjunct Professor and serve on several university advisory councils.

I am also a member of TD Ameritrade’s NextGen Advisory Board and serve on Guggenheim Investment’s RIA Advisory Board. I am currently listed as one of the “Top 20 Most Social Financial Advisors in the U.S.” as ranked by BrightScope’s Social Media Influence Rank.The author is a Forbes contributor. The opinions expressed are those of the writer. What’s more American than enjoying a hot summer day with hamburgers on the grill and a cold Budweiser chilling in the cooler?

Except, you may not realize that the Budweiser you are enjoying is actually not American at this point. Rather, it is owned by an international brewing conglomerate with its headquarters in Belgium. The stock has had a good run in 2014, but can it continue?Anheuser-Busch InBev (Ticker: BUD) was created in 2008 with the merger of Belgium-based InBev and U.S.-based Anheuser-Busch, and it is currently the largest brewer in the world. Following its acquisition of Grupo Modelo, the company’s portfolio contains five of the world’s top-10 selling brands of beer, and has 17 brands with retail sales over $1 billion. AB InBev is truly an international company, with its roots in Belgium and the U.S., but also significant exposure in Latin America.

Brazil, home of this year’s World Cup and the 2016 Summer Olympics, is AB InBev’s second-largest market behind the U.S. Another push is in China, where market share is much smaller, but business prospects are promising, as net income has recently increased by nearly 50%. (Photo credit: Wikipedia)The financialsAB InBev has relied on a strategy of aggressive acquisition to grow revenue and margins. One look at their financials and you can see how successful the company has been in implementing their strategy. They have rapidly grown revenue and earnings per share (EPS) over the past five years and have an extremely high profit margin given the company is considered a consumer staple.Anheuser-Busch InBevMolson CoorsHeinekenSales growth, five-year12.9%-2.5%6.0%EPS growth, five-year35.3%7.8%40.9%Gross profit margin — TTM59.7%39.9%36.5%Operating profit margin — TTM46.7%16.6%8.3%Source: Morningstar, Charles Schwab. Download cricket captain 2019.

Data as of 6/27/2014.Cash flow has suffered in the short-term due to its acquisitions of Grupo Modelo in 2013 and Oriental Brewery in South Korea earlier this year. Nevertheless, their aggressive strategy to invest in brands with positive cash flow in emerging economies should continue to pay off.Dividend growthCurrently, the dividend yield is at 1.75%, but AB InBev has been aggressively increasing their dividend over the past five years as the five-year dividend growth rate is over 50%. In 2010, AB InBev paid a yearly dividend of $0.49/share and in 2013 they paid out $3.03/share. We expect dividend growth to continue as the company has a very low payout ratio.ValuationIt would be hard to consider AB InBev cheap, as it has returned nearly 30% annually over the past three years, but the P/E ratio tells a different story. The trailing 12-Month (TTM) P/E Ratio is 13.6, which is significantly cheaper than its peers Molson and Heineken (19.8 and 22.0, respectively) and less than the overall S&P 500 company average, as of June 26, 2014.Competition and concernsIn the U.S., the emergence of craft breweries has cut into the revenue of AB InBev’s core brand, Budweiser.

Ab Inbev Stock

Craft beers are sold at premium prices, and their ability to increase distribution and cut costs will lead to higher profits in the future. AB InBev appears to be slow to catch up in the craft-brewing space, but the recent acquisition of Blue Point Brewery, as well as past purchases like Goose Island and Shock Top, should continue their growth in this area.

AB InBev is also addressing this concern by focusing their advertising dollars on Corona as a premium product which demands a premium price and higher margins than most of their other brands.As previously mentioned, AB InBev is an international company that has relied on acquisitions to grow the brand. If we see these acquisitions slow down, we could also see the growth rate slow as well. In the U.S., a Budweiser may be considered more of a staple than a cyclical product, but in many emerging markets, the sale of beer is very much related to GDP. AB InBev is highly reliant on the Latin American market, and their success is dependent on the future growth of these countries.RecommendationWith the combination of very strong financials, a fairly low valuation, and a high dividend growth rate, AB InBev looks poised to continue their strong growth. Although we are concerned that a potential slowdown in acquisitions and the growth of the craft-beer category could slow revenue growth, AB InBev’s has shown they are up for the challenge. AB InBev also controls only about 20% of the world market share, so they do have room for growth and further acquisition.

We recommend accumulating shares of this company on any significant pullback from current levels.Now back to that barbeque.–Disclosure: Clients and employees of Mainstay Capital Management may hold the securities mentioned in this article in their investment portfolios. The securities mentioned may not be suitable for some investors, based on their tolerance for risk or their investment time horizon.