By Brian Nelson, CFA
Just as I’m writing the intro to this edition of the September edition of the Best Ideas portfolio, the good news keeps coming. If you’ve read anything about our top holdings, you’d be hard-pressed to miss a discussion on Altria (MO) and our thesis that goes into the tobacco firm’s 27% economic stake in fast-growing global brewer SABMiller (SBMRY) as support for not only its dividend growth but also its valuation.
The news wires are buzzing that SABMiller approached Heineken (HEINY) for a tie-up, and that Heineken rejected its offer. However, there are now talks that Anheuser-Busch InBev (BUD) is looking to put together a bid for SABMiller, and shares of the latter are soaring on the news. This is fantastic for Best Ideas portfolio holding Altria, as it benefits from the equity appreciation of its rather large stake in the brewer.
At this point, we’re not sure which path Altria may take with its stake, but under any scenario it is quite positive. Either Altria benefits from a higher value of its economic interest in SABMiller, or it is provided an avenue to avoid an illiquidity premium upon selling the stake. This could potentially result in a huge cash inflow to Altria, which would further reinforce its dividend strength. We’ve talked about Altria’s hidden gem in SABMiller, and we trust you have profited greatly on this idea.
Another key development since the last edition of the Best Ideas Newsletter had to do with Apple (AAPL), which released its next-generation iPhone 6 as well as its first wearable watch and payment platform (see page 7). As you know if you’ve been active on valuentum.com/, we’re expecting big things as it relates to the upgrade cycle at Apple. Apple has been one of the best performers, and it recently notched a new all-time high. Remember the transaction alert adding to the position in the Best Ideas portfolio and starting a new position in the Dividend Growth portfolio many moons ago? We give the performance of both Altria and Apple a high mark: A+.
This edition covers a wide number of topics from analytical to psychological and beyond. In the Valuentum spirit, we try to provide a variety of different perspectives in your reading. I hope you enjoy this edition of the newsletter!
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Beverages – Alcoholic: BEAM, BF.B, BUD, SAM, BORN, CCU, STZ, DEO, FMX, TAP