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 10%
and 11% 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 buyback 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,
(4)
increasingly hostile business environment in Russia.
Brown Forman is rated A+ by Value Line, has a 40% debt to
equity ratio and its stock yields 1.3%
Statistical Summary
Stock
Dividend
Payout # Increases
Yield Growth Rate
Ratio Since 2004
BFB
1.3%
7%
32%
10
Ind Ave
2.3 10
38
NA
Debt/
EPS Down
Net Value Line
Equity
ROE Since
2004 Margin
Rating
BFB
40% 28%
1
24
A+
Ind Ave 37
24
NA
14 NA
Chart
Note; BFB stock made great progress off its March
2009 low, quickly surpassing the downtrend off its August 2008 high (straight
red line) and the November 2008 trading high (green line). Long term it is in an uptrend (blue
lines). Intermediates term it is in an
uptrend (purple lines). The wiggly red
line is the 50 day moving average. The
Dividend Growth Portfolio owns a full position in BFB but that is due to
Selling Half in mid 2012 and the stock continuing to rise (reminder, our
discipline is to only Sell Half once).
The upper boundary of its Buy Value Range is $36; the lower boundary of
its Sell Half Range is $65.
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