Beverage stocks worth a look

Your Money

July 16, 2006|By ANDREW LECKEY | ANDREW LECKEY,TRIBUNE MEDIA SERVICES

Beverages can be a refreshing antidote for the summertime stock market blues.

Shares of Anheuser-Busch Cos., the world's largest brewer, are up 5 percent this year. Steven Ralston, senior analyst with Zacks Investment Research, said it is an attractive purchase because it has about half the U.S. beer market.

Aside from Budweiser, it also owns 50 percent of Mexico's Grupo Modelo, maker of Corona beer, and recently purchased the Rolling Rock brand. These are reasons why Warren E. Buffett's Berkshire Hathaway owns 44 million Anheuser-Busch shares.

In the red-hot area of energy drinks, Hansen Natural Corp., the marketer and maker of Monster Energy and other popular drinks, is up 133 percent this year to add to last year's 333 percent increase.

Molson Coors Brewing Co., whose shares are up 2 percent this year, is the world's fifth-largest brewer with Coors, Molson Canadian and Carling brands. While it doesn't have the scale to effectively compete one-on-one with Anheuser-Busch, Ralston said it might be worth buying if beer volume increases.

The Stifel Nicolaus & Co. investment firm recently forecast that both Anheuser-Busch and Molson Coors will exceed profit estimates on higher sales volumes and less cut-rate pricing.

Among premium-spirits companies, Brown-Forman Corp., whose shares are flat this year, has developed a loyal and growing following for its famous Jack Daniel's whiskey. The maker of Southern Comfort and the Fetzer and Bolla wines would be an attractive purchase if its current stock price slipped a bit, said Matthew Reilly, equities analyst with Morningstar Inc.

Diageo PLC, the world's largest maker of premium spirits, whose brands Johnnie Walker scotch and Smirnoff vodka continue to be powerhouses, is up 14 percent this year. It also makes Guinness stout, Tanqueray and Gordon's gins, Captain Morgan rum and Bailey's Irish Cream, and would be a good purchase on a price dip, Reilly said.

In non-alcoholic drinks, Coca-Cola, up 6 percent this year, is expected to show progress in its turnaround strategy in key markets, while both it and PepsiCo's Pepsi-Cola unit should benefit from higher U.S. retail pricing, according to projections by Standard & Poor's Corp. PepsiCo is up 5 percent in 2006. PepsiCo's beverages include the popular Gatorade sports drink.

Andrew Leckey writes for Tribune Media Services.

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