Quarantine Blues? Buy Some Beer

Out of work and not driving anywhere? What a great time for a couple of beers. That same advice is also true for investors. Both AB InBev and Molson Coors are now terrific values due to virus-related sell-offs. Near-term results are likely to suffer, but long-term prospects still appear to be fine. Analysts expect reasonable 2020 earnings followed by improved EPS in 2021 and beyond. BUD's balance sheet rates an A from Value Line while TAP garners a B++. Neither firm should feel any life threatening liquidity crunches. Both continue to pay generous dividends that are well-covered, even at temporarily reduced cash flow levels. Prior to its recent plunge AB InBev topped out above $102 during each of the seven years stretching from 2013 right through 2019. BUD changed hands as high as $83.50 in January of this year. As of Friday, BUD was available for just shy of $50. That represents just 14.2-times this year's already trimmed estimate, accompanied by a better than 4% current yield. Those compare favorably with a multi-year normalized price-to-earnings of 19.5-times and about 2.92% in yield. There every reason to believe BUD will rebound to at least north of $68 by the December 31, 2020. Hitting that modest goal would provide around 40% in total return from the current quote. That's pretty good on a high-quality, market leader with an above average safety rating. It's also far from an upper limit based on BUD's past trading history. I'm not alone in seeing the upside on AB InBev. Independent research house Morningstar assigns BUD its highest, 5-star, buy rating. They call present-day, as opposed to year-ahead, fair value as $96 per share. Getting back to Morningstar's more aggressive goal price would deliver more than a double in total return if it takes a full year to achieve. Give BUD bonus points, too, for its wide economic moat and exemplary management team. Molson Coors does over $10 billion in annual sales compared with BUD's approximately $52 billion in yearly revenue. Its appreciation potential appears equally good, though. After booking some non-recurring charges last year TAP is expected to show improved results in 2020, despite the coronavirus effects. At its Friday closing quote of $47.40, TAP sold for just 12.3-times this year's estimate while paying 4.81% in dividend yield. Typical levels for TAP run about 18.2-times and 2.39%. My very conservative end of this year target price is now $69.30, about 46% above where it closed last week. That might prove to be way too low a target. At previous peaks in the six years from 2014 through 2019 TAP fetched from $67 to $112. Molson Coors' forward multiple is now lower than it sat at the lows in 2012, 2013 and 2014 just before major rallies materialized. As with BUD, Morningstar is quite positive on the shares. They call it a 4-star, out of 5, Buy, while noting its low price-to-earnings and high yield. Morningstar sees TAP's present-day fair value as $60, about 26.6% above its current price. Getting to even that price, if it takes a full year, would provide greater than 31% in total return. Note, too, that TAP changed hands as high as $61.40 as recently as February of 2020. The table below shows each stock's current price, yield and upside to my own, somewhat conservative, January of 2021 goal prices. BUD's larger size and perceived extra financial strength leave its total return potential a tad below that of TAP. I'd venture to say, though, that most investors would be quite satisfied with anything close to 37% to 46% returns over the next nine months. Settle back in your easy chairs, turn on your Hulu, Disney Apple , Roku or Netflix programming and knock down a few beers. It'll be good for business. (Apple and Disney are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells them? Learn more now.)

Quarantine Blues? Buy Some Beer

Here's a play you can cheer: Cracking open shares of BUD and TAP at a great value.

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