Anheuser-Busch (BUD ) (BUD), maker of the King of Beers, doesn't get much respect on the Street. Major analysts are down on the stock, which has slid from 50 in early January to 44 now. Although it controls 50% of the U.S. beer market, Anheuser has shown little growth in recent years for two reasons, note the bears: Beer sales have been flat -- unlike those of wines and spirits. And its market share hasn't expanded because its main brands cater to low-income groups. Looking beyond Anheuser's current malaise, however, are some smart-money pros, including Warren Buffett, whose Berkshire Hathaway (BRK ) bought a sizable stake in Anheuser in April. (A Berkshire spokeswoman did not return calls for comment.) Sarat Sethi, a principal at investment firm Douglas C. Lane & Associates, which has accumulated shares, says Anheuser's woes will be short-lived. The company has taken steps to cope with market pressures, including stiff competition from Miller (SBMRY ) and Coors (TAP ). Anheuser is twice the size of Miller and four times as big as Coors. Sethi says its premium new "Bud Select" should attract high-end drinkers and add oomph to earnings. The next big growth driver will be foreign markets, such as China and Mexico, he says. Anheuser owns 27% of China's Tsingtao Brewery (TSGTY ) and 50% of Mexico's Corona. Steve Rogé of Rogé Partners Fund, which owns shares, says Anheuser is a long-term play that will reward patient investors. He predicts that by 2006's second half, Anheuser will see double-digit earnings growth. It has a 2.4% dividend yield and has been buying back shares. Rogé sees profits of $2.65 a share in 2005 and $2.85 in 2006. He puts Anheuser's intrinsic worth at 56.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial