Beam Inc. (NYSE:BEAM) is a much smaller company than the other two, with a market size of about $10 billion. But that gives Beam an edge for investors — because in addition to a powerful lead brand in its namesake Jim Beam, it also has big buyout potential that could pay off for investors who front-run a deal.
First, let’s talk stability. Beam owns Courvoisier cognac, Sauza tequila and Maker’s Mark along with its Beam bourbon. In addition to brand power in the U.S., this lineup is catching on big-time abroad — especially in India, where the company has seen an annual growth rate north of 25% across the last five years. Clearly despite its smaller market size, BEAM is not a bit player.
That should make you feel good about holding this stock even if it doesn’t break out. Spirits heavyweight Diageo might want to look beyond scotch and into bourbon with Maker’s Mark or Jim Beam. Or midsize beverage player Brown-Forman (NYSE:BF.B) might reach for Beam to get its Sauza tequila business, among other labels, and diversify its product line.
Beam is certainly more speculative than the other entrenched beverage stocks named here. It has lagged the market in 2013, and has pretty much paced the S&P in the past 12 months. With a forward P/E of 22, Beam is admittedly a bit frothy — but investors might want to drink up the stock on a pullback.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.