Blue-Chip Stocks to Avoid #4: Anheuser-Busch InBev (BUD)
Still, BUD stock remains on the wrong side of consumer trends. U.S. beer sales fell in 2013, with light beers taking the biggest hit while craft beers grabbed a bigger share of the pie. As discussed in detail in this 2013 article from The Atlantic, beer is losing ground relative to both wine and spirits in the United States, particularly among young people. Granted, BUD is a global company and still the world leader in market share — a plus given that beer consumption continues to rise worldwide. However, much of this growth is coming from China, where local beers are the dominant brands.
These trends are reflected in BUD stock’s slow growth and falling earnings estimates, but not its valuation: its shares fetch a hefty 17 times forward earnings estimates. In contrast, Molson Coors Brewing Company (TAP) is valued at 13.6 times estimates. Not only that, but BUD stock is more than twice as volatile as the overall consumer staples sector, indicating that investors have to take on excess risk for InBev’s modest return potential.
With shares bumping up against resistance in the $105 area, BUD stock is best avoided here.