You've heard the old saying about value investing being like watching grass grow or paint dry. When it comes to portfolio holding Molson Coors (TAP/NYSE), we can add that value investing can be like watching beer dry.
Molson Coors was recommended on Controlled Greed.com in June 2005 at $60.35. The stock had dropped because the merger between Coors and Molson wasn't going as smoothly as planned. Beer sales in the US were flat (pun intended) and a price war between Coors, Budweiser and SABMiller was looming and would hurt profits. Molson, which is hugely popular in Canada, had slower sales due to the NHL being on strike (Molson is a big sponsor of hockey). The company also had some problems with its UK assets and a lousy-performing beer business in Brazil (which it subsequently sold).
All of these were short-term challenges. Molson Coors has good management under CEO Leo Kiely. The company wasn't going to go out of business. It was unloved on Wall Street, but so what.
The stock closed yesterday at $76.76. That's a gain of more than 28%, not including dividends. No, that's not a homerun. But it is a respectable, if not spectacular, return on investment. And if every stock would do as well I'd be delighted. I should point out that Molson Coors has been in the portfolio for 18 months, and with my 3-to-5 year time horizon there's still plenty of time for things to go wrong.
I don't expect that to happen. Yet with the shares recently hitting new highs, we could always see a pullback.
I'm writing about Molson Coors because, well, I haven't mentioned it much since buying it. This is a case of a company and its management quietly working things out and growing the bottom line over time. It may not be exciting. But it sure is profitable.
On the other hand, the only one of the world's top three brewers you've beaten since your purchase is Anheuser. SABMiller beat Molson-Coors over that period by ~1000 bps, and InBev.. well, it's almost embarrassing how much better InBev stock has done than the rest, and I say this with chagrin as a longtime SAB long (you'll pity me less if you look at the five-year chart, but a mistake is a mistake is a mistake).
Don't get me wrong, it was a nice call for a US-only mandate, since SAB and InBev are listed in London and Brussels, respectively. Beating BUD is outperformance, for which congratulations. Still, your profit isn't company specific if the whole sector moves, and it did.
Cf http://bigcharts.marketwatch.com/charts/big.chart?frames=1&symb=tap&compidx=aaaaa%3A0&comp=BE%3A000379310+UK%3ASAB+BUD&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&size=2&state=8&sid=1936450&style=320&freq=1&startdate=6%2F14%2F05&enddate=12%2F30%2F2006&mocktick=1
Crossposted to seekingalpha.
Posted by: wcw | December 30, 2006 at 01:14 PM
wcw: I may be wrong, but on an annualized basis TAP has gained 18%, not including dividends. I'd be delighted if every stock did that. If you made more money in other stocks, congratulations.
Posted by: John | December 30, 2006 at 05:18 PM
When brewers as a whole outperform, I don't congratulate myself for owning one among them that also outperforms, unless it further beats the sector, like InBev has.
I am the first to admit my near-sector-performance pick was an opportunity lost.
Posted by: wcw | January 04, 2007 at 08:15 PM
wcw: I spend as much or more time posting about the stock picks not performing well. I strive to make a decent return on my stock picks as a whole. I think TAP qualifies as a good investment performer so far. Period. If another company has done better, so be it.
Posted by: John | January 05, 2007 at 12:33 AM