Tuesday, June 25, 2013

Brown Forman (BF.B) 2013 Review

Brown Forman (BFB) produces and markets Jack Daniel’s, Southern Comfort, Finlandia, Canadian Mist,  and Korbel.  The company has earned a 20-25%+ return on equity and grown profits and dividends between 9% and 10% over the past 10 years.   Historically, BFB has managed to increase earnings per share through even the toughest economic period and should continue to do so as a result of:

(1) the competitive advantage offered by its strong portfolio of brands,

(2) geographic expansion into developed [France] as well as emerging [Russia, Poland, Mexico] markets,

(3) broadening of its Jack Daniels product offerings [Gentleman Jack, Jack Daniels Single Barrel],

(4) a stock buy back program.

Negatives:

(1) its products are sensitive to economic developments,

(2) a highly competitive industry,

(3) distilled spirits are subject to excise taxes in various countries; increases can have an adverse effect on the company’s financial results.

Brown Forman is rated A+ by Value Line, has a 40% debt to equity ratio and its stock yields 1.5%

    Statistical Summary

                 Stock     Dividend         Payout      # Increases  
                 Yield      Growth Rate     Ratio       Since 2003

BFB           1.5%          7%               33%              10
Ind Ave      2.3             8                  37                 NA 

                Debt/                        EPS Down       Net        Value Line
              Equity         ROE         Since 2003      Margin       Rating

BFB          40%           22%            1                 22             A+
Ind Ave     44              21              NA               13            NA

      Chart

            Note: BF.B stock made great progress off its March 2009 low, quickly surpassing the downtrend off its August 2008 high (red line) and the November 2008 trading high (green line),  Long term, BF.B is in an uptrend (straight blue lines).  Intermediate term, it is in an uptrend (purple lines).  It recently broke its short term uptrend (brown lines).  The wiggly blue line is on balance volume.  The Dividend Growth Portfolio owns a 50% in BF.B by virtue of the stock having traded into its Sell Half Range and our Portfolio acting accordingly.  The upper boundary of its Buy Value Range is $33; the lower boundary of its Sell Half Range is $58.




6/13

No comments:

Post a Comment