For an immersive experience in tasting fine single malts, craft beers, and other spirits, nothing beats a visit to a distillery or brewery. And for alcoholic-beverage company shareholders, a brewery or distillery tour is also the chance to get Peter Lynch-like insights into the companies in their portfolio or on their watch list.
As the master investor has said, buying stocks without studying the underlying company is like betting in a poker game without looking at your cards. Success in either pursuit requires a fair amount of research and due diligence.
Of course, Lynch never said that due diligence couldn't be fun.
Before you hit the bottle, do some digging
While a site visit to a brewery or distillery is a particularly entertaining pursuit, first and foremost you should treat it as a chance to see your company in action. Sometimes, after reading all the SEC filings, annual reports, earnings releases, and of course, The Motley Fool articles, a personal visit can help you glean info impossible to discover any other way.
Don't just soak up the suds, soak in the culture. Ask questions. Have there been any slowdowns in operations? Are basic ingredients getting more or less expensive? Has production slowed? Why? Can the company keep up with demand? Does c-suite management ever visit? Any labor or other issues on the minds of employees?
Take notes. Don't rely on a single-malt-addled memory. Most larger distilleries and breweries offer tours with some featuring restaurants and on-site accommodations.
Now, onto the fun.
Boston Beer's (NYSE:SAM) brewery is available for tours year-round for only a $2 donation, a true bargain compared to some other tours. In fact, people can get married at the Boston brewery on the annual release of Brewlywed Ale, with company founder Jim Koch as witness.
Boston Beer makes more than 50 brands of craft beer and is growing that number annually through its Alchemy & Science microbrew incubator program.
Boston Beer trades at a 34 times forward earnings multiple. Analysts expect growth to slow from the company's torrid 40% earnings-per-share growth rate of the past five years to 10% going forward.
For $10 you can get the hour-long tour. And for $199 you will visit with master distiller Fred Noe, eat a bourbon-themed meal, and tote home a commemorative bottle. The Huffington Post listed it among several distilleries to visit on its Kentucky Bourbon Trail itinerary, and liquor.com listed it as one of the 10 distilleries to visit before you die.
U.S.-based Beam reported soft third-quarter numbers, but its bourbons remain strong, and the company expects its new bourbon flavor extensions, smoky maple and honey, to perform well this year.Once considered a Diageo (NYSE:DEO) acquisition target, Diageo CEO Ivan Menezes put paid to that rumor in November, quoted in the press as saying his company did not need to buy Beam.
Beam trades at a 23.5 forward earnings multiple and has a yield of 1.3%.
French company Pernod Ricard (OTC:PDRDY) owns Plymouth Gin in England and its distillery, Black Friars Distillery, the oldest working gin distillery in England, if not the world. Americans might be surprised to learn it was our Pilgrims' last stop before leaving for America.
Their top-of-the-line tour at 40 pounds offers a chance to create your own gin recipe under the watchful eye of the master distiller and take home a 200 ml bottle of your own creation. The company is also opening its London Beefeaters Gin distillery to the public this spring.
Beefeaters is one of its 14 premium brands that include Absolut and Chivas Regal. The company is No. 2 worldwide in wines and spirits, despite a market cap at $32 billion -- almost half that of giant Diageo. The company trades at a trailing earnings multiple of 19.2.
Scotches in Scotland
Diageo owns so many scotch distilleries (more than 25) that one could spend an entire vacation touring them. Achroisk, Glenkinchie, and Clynelish are just a few of exotically named distilleries available to tour. However, its Talisker Distillery in Scotland on the isle of Skye is another on the liquor.com bucket list. This one also features cottages for rent by the waterfront distillery.
Visiting one Diageo distillery will not reveal as much as a smaller operation like Boston Beer. Diageo is a global operation that has been growing through smaller acquisitions worldwide. However, if you are a long-term shareholder, you could schedule visits to its far-flung factories as part of your vacations.
Most recently it purchased a Brazilian company that produces cachaca, a distilled sugarcane juice spirit, and bought stakes in Indian company United Spirits International, Halico in Vietnam, Mey Icki in Turkey, and added to its stake in Sichuan Shuijinfang, a Chinese company.
Diageo has 14 strategic power brands of which six are No. 1 globally. Most of its eight other strategic brands are No. 2 in specific markets. Diageo trades at a forward earnings multiple of 17.5 and offers a 2.9% yield.
What does your (beer) gut tell you?
Once the mellow feeling dissipates, review your notes and your thesis on the company. With these fine companies it shouldn't change dramatically. At best, it should reinforce your conviction. At worst, you might change your stake. In any event you enjoyed some delicious due diligence.
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