The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

BUD – Anheuser-Busch

Summary:

I’m a 2-3 bottles daily beer drinker so I appreciate why Anheuser-Busch should be among your long-term investments.

For many decades now, beer drinking is a daily habit of billions of people in the world. Unlike hard drinks like whiskey or tequila, beer is considered a healthy drink.

Budweiser and Bud Light are the world’s most valuable beer brands. Buying SABMiller last year also gave Anheuser-Busch 4 more top-ranked beer brands.

Being the king of beer is likely why Anheuser-Busch has a very strong history of dividend payments. This company’s future is insured by the world’s endless love for beer.

BUD has positive near, mid-term, and long-term algorithmic forecasts from I Know First.

I usually write mostly on technology and gaming-related tickers. However, I would like to take this opportunity to endorse a Buy rating for Anheuser-Busch InBev (BUD). This maker of Budweiser and Bud Lite beer products is an excellent dividend income stock for long-term investors.

Drinking beer is a global habit. It’s a universal healthy hobby for billions of people around the world. This fact is why BUD has consistently delivered strong dividend payments for the last 10 years. Please study the chart below, BUD has never failed to pay a dividend since 2009.

(Source: vuru.co)

In spite of stiff competition from Heineken, Budweiser and Bud Lite still remained as the two most valuable beer brands.

Having the world’s two most valuable beer brands is why Anheuser-Busch has retained its gross margins at over 53% since 2007.

(Source: vuru.co)

The chart above also shows competition from other beer brands did not derail BUD’s growing annual revenue from 2007 to 2016.

Why BUD Is Special

Unlike the stagnating smartphone business and declining tablet industry, the global beer industry is still a growing trade. As per the chart from Allied Market Research states, the global beer market is growing at a CAGR of 6.01%. The global beer market will be worth $688.4 billion by 2020. The Asia Pacific Region (where I live) is the fastest market for beer manufactures like Anheuser-Busch.

(Source: Allied Market Research)

Anheuser-Busch’s $103 billion takeover of SABMiller last year made it the biggest long-term beneficiary of the growing beer industry. These two giants now control most of the beer industry. In addition to Budweiser and Bud Lite, Anheuser-Busch now owns SABMiller’s top-ranked beer brands like Skol, Corona, Stella Artois, and Brahma.

(Source: Visual Capitalist)

It is always great to invest in upsized companies like Anheuser-Busch. In the tough business of consumer goods, size always matters. Anheuser-Busch’s takeover of SABMiller made it the Godzilla of beer. It now likely controls more than 30% of the global beer market.

BUD has 15% Upside Based on DCF EBITDA Exit Model

The growing global beer industry and the takeover of SABMiller convinced me that BUD still has a lot of upside potential. Below is my DCF EBITDA Exit Model valuation for Anheuser-Busch InBev. I believe this company can deliver consistent year-over-year revenue growth for the next 10 years. I also believe that it can maintain its EBITDA to Revenue ratio at above 41%.

(Source: Motek Moyen/finbox.io)

Below is the discount rate and terminal value range I used for my DCF EBITDA Exit model valuation for BUD.

(Source: Motek Moyen/finbox.io)

Conclusion

Investors can expect BUD to continue its strong dividend payment history. The global beer industry is still growing at 6% CAGR. Anheuser-Busch has made itself the biggest beneficiary of the world’s fondness for beer when it bought SABMiller.

I am a type 2 diabetic but I’m still a daily consumer of beer, 2 to 3 bottles. My favorite brands are Red Horse and San Miguel. I also like Budweiser but its imported here in the Philippines. A Budweiser costs 3x than a San Miguel here in my country. It’s also hard to find a store that carries it. Only upscale restaurants and liquor stores stocks Budweiser.

My go-long endorsement for BUD is supported by the positive near and long-term algorithmic forecasts from I Know First. The algorithmic market trend forecasts are saying Anheuser-Busch’s stock is unlikely to suffer any lingering downtrend this year. In fact, the probability is high that BUD will shoot up in price within the next 12 months.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.