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Fortune has strong brands in each of its three business units -- golf, home and security, and spirits. The golf unit features Titleist, while the home and security business offers Moen and Master Lock, among many others. The spirits division is quite a jewel, with global brands Jim Beam (the top bourbon), Maker's Mark (the top super premium bourbon), Sauza (the No. 2 tequila), and Courvoisier, among many other national and regional brands.
U.K. spirits giant Diageo
Fortune's exposure to discretionary spending is worth noting. A weakness in the company has been its home and security portfolio, less because of the business itself than the overall economic climate and the housing debacle. Rivals such as American Woodmark
Even the golf division remained profitable on an annual basis throughout the tough times, something rival Callaway Golf
And as the economic climate improves, it opens a major opportunity for Fortune to expand its key liquor brands and increase profitability at its home and security unit. In the boom times, home and security earned more operating profit than the spirits business. That's a powerful driver for future returns, should the economy return to normal, whether home and security is a separate business or not.
A major threat for the spirits business is increased taxation, especially as states continue to see shortfalls in their budgets. Sin taxes are an easy sell, even in good times. And of course, there's the ongoing branding and marketing from other liquor companies ready to make their mark.
So with a major transaction on the horizon, there's a lot to like about Fortune now. I'm especially intrigued by the interest shown by Diageo and Pernod Ricard. That's part of the longer-term consolidation of the industry, and one that still looks profitable for investors in Fortune, even at this late date.
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Jim Royal, Ph.D., does not own shares of any company mentioned here. Fortune Brands is a Motley Fool Stock Advisor selection. Diageo and Masco are Motley Fool Income Investor recommendations. The Fool owns shares of Diageo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.