Reuters Insider - Whiskey in the Bar, Reddi-wip in the Portfolio

Honey Badger Silver

01/06/2016 10:17

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 https://insider.thomsonreuters.com/link.html?cn=share&cid=1619040&shareToken=MzpmNTczNTRlOS0wODgyLTQwZTAtYmY4NS03ZWFiMDA2NGQ5NWQ%3D&playerName=ReutersNews 
                                                                       
 Source:             Thomson Reuters                                   
                                                                       
 Description:        Barron's Bounce: ConAgra stock is up after        
                     Barron's recommended the consumer-food brand      
                     company's shares. Jack Daniel's-owner Brown       
                     -Forman, whose stock looks expensive according to 
                     the magazine, is slipping.                        
 
 
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Transcript (May be auto-generated)

                 I usually rather have bourbon than Reddi-wip. But from a portfolio perspective, 
the Reddi-wip might be the better deal. I'm Jack Otter, Editor of Barrons.com. 
I'm here with Jack Hough, Senior Editor at the magazine. Everyone knows you like
Slim Jims with your bourbons. I don't know why you even brought Reddi-wip into 
it. Those go well together actually. But from a portfolio, you tell me stay away
from bourbon. Let's start with ConAgra. That's the good news story. Robin 
Blumenthal has a story in Barron's that says that stock is undervalued. It's got
a new CEO and it's up about 1.5% on her recommendation. Yeah. So this is a 
company that makes Slim Jims and banquet-prepared frozen meals, Marie Callender,
if I'm saying that correctly. It's basically bachelor food. Yeah, right. And 
they got rid of a private label business. They are pruning down the portfolio 
and we've seen some of these, the packaged food stocks take off, if they can get
the mix right, get to some good growing brands, extend some strong brand names 
in the new products, eventually maybe get bought or do some buying of smaller 
companies. So that's the hope here and it's—management has had success with 
other companies. The chief here had some success with Hillshire— 

—which was taken out of a huge premium. —driving to make a turnaround there.
So you're paying 18x earnings, 18x forward earnings for the stock. And that's 
about what these companies are going for now if the idea is that you can get a 
ramp-up of growth from here with a better core portfolio. The stock could do 
well from here. On the other hands, you wrote about Brown-Forman which owns a 
big collection of spirits and they're selling for 27x earnings which you say 
might be a bit steep despite the cocktail culture and the excitement over 
bourbon these days. And look, it's a great company. They've done very well for 
their shareholders. 

Some of these things that are going well for them I think are durable trends –
the switch from vodka to brown liquor of all sorts is a move that I expect to 
continue for a long time. They're doing well with – it went out lately – 
with exports. Emerging markets growth is slow. But really, a large portion of 
their growth in recent years has come from flavored whisky. The Jack Daniels 
Tennessee Honey and Tennessee Fire – those are huge sellers, right, but 
they've attracted a lot of competitions. The number of these flavored whiskeys 
out there has just exploded. If you look behind a bar today, you're going to see
everything apple-flavored, honey-flavored, cinnamon-flavored, on and on. But 
that's not going to last forever. It's not going to last forever and the growth 
has already started to slow. Fire is still doing pretty well but Honey, which is
the older one, the growth there has started to slow. So if you're 27x earnings, 
you need to be putting up double-digit growth. And Brown right now is kind of a 
single-digit earnings grower. At the moment, that has a lot to do with some 
currency swings. I never worry about that because that's a problem that usually 
takes care of itself in the long run. But I think once that goes away, I think 
you start to see slowing growth with the flavored booze unless they come out 
with a new hit flavor. I think the multiple might need to come down a little 
bit. It's not a disaster for them, but I just think that the stock is priced 
like a company that should be growing faster. Stick to the Woodford Reserve. I 
worked with a great old-time crotchety cool-under-fire Editor named Bob Brandt 
at Newsday. He turned me on to Woodford Reserve many years ago, good stuff. I 
can tell you it's growing very well. It's just not big enough to move the 
needle. Right, and it never will be. Yeah. Thanks, Jack. Thank you