The Kraft-Heinz Deal Through The Lens Of Anheuser Busch

From an owner’s perspective, the advantage of having 3G operate your business is that a higher percentage of revenues become net profits that can be paid out to shareholders as dividends free and clear. The downside is that you cannot cut your way to prosperity, and eventually, you have to come up with growth initiatives.

Let’s look at what 3G did to Anheuser Busch since taking over. Even though the ADR of Anheuser-Busch began trading on July 1st, 2009, I am going to compare 2010 to 2015 because the 2009 recession distorts the picture of what 3G management does because the demand was unusually low for Anheuser-Busch products that year.

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The S&P 500 Has Been Draining Investors Since 2005

When people buy shares in an Index Fund, they assume that they are buying shares in the largest companies available in the United States. You look at Apple, see its $700 billion market capitalization, compare it to the 4% allocation in the S&P 500, and figure it sounds about right. And for much of the 1950s, 1960s, 1970s, 1980s, 1990s, and 2000s, this was true. But in 2005, the S&P 500 shifted from selecting stocks based on market capitalization to selecting stocks based on a market capitalization with a formula that takes into account the free float of the stock.

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Investing On The Eve Of Crisis

Lately, I’ve been doing some back-testing to try and find good answers to the following: (1) What if someone invested a lump sum in 2007 right before the financial crisis, and (2) what if that investor paid an unusually high premium for the stock even during a period of high valuations? It’s been my way of challenging the Benjamin Graham thesis that investors should focus on getting the price above all else. I wanted to test scenarios to see what happens if treated quality as your primary concern, and regarded price as a secondary matter (you can never truly get past “price matters” because paying something like 50x earnings for Coca-Cola in 1998 will take 25 years to burn off, but you can test what happens when you pay 25x earnings for a high-quality stock instead of 20x earnings.)

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