Monday, March 26, 2012

Dit BUD is voor u!

Dit Bud is voor u!, says American beer icon Anheuser-Busch InBev NV (BUD) from its headquarters in Leuven, Belgium. Illustrating yet again that in the early 21st century, all icons are global and "Buy American" is an effervescent goal.

Anheuser-Busch in more than Bud and Stella Artois, of course, of course. The company's stable of brews also includes Skol, Brahma, Quilmes, Michelob, Harbin, Sedrin, Klinskoye, Sibirskaya Korona, Chernigivske and Jupiler.

BUD had the most bullish chart among 12 companies added over the weekend to the Zacks best-buy list.

The price began its present uptrend in September 2011 at $49.08 and has since traced a steep path up to today's high of $73.46, an all-time high. BUD moved into blue-sky territory on March 9, topping the prior highest high of  $69.28.

BUD has return on equity of 16% -- a respectable level that is marred by long-term debt due mainly to aquisitions that is equal to 107% of equity. That debt is not necessarily a deal killer, of course. I'm not looking to BUD as a long-term buddy. And even if I were, if the company has the ability to turn its purchase into profits, then that's good for the shares price.

The company's principal market presence is on the EuroNext exchange under the ticker symbol ABI. That's where the serious institutional money will mainly go. The New York Stock Exchange presence has only 4% institutional ownership.

The chart itself has the jumpiness common to American depository receipts (ADRs) whose price tracks trading on foreign exchanges.

The price is on the expensive side. It takes $2.95 in BUD shares to control a dollar in sales.

With average volume of 1.3 million shares, BUD has a fair selection of options, very few of which have open interest. (It's an ADR, after all.) Those that do have open interest tend to be in three figures on the call side, two figures on the puts.

Bid/ask spreads are tolerable, perhaps a bit wider than I like.

Implied volatility is at all-time lows, at 24%, giving a 68.2% chance the price will be between $68.17 and $78.17 a month from now.

Decision for my account: I've opened a long (bull call) vertical spread on BUD with September expiration, long the $72.50 call and short the $75. The risk/reward ratio is about even, at 13:16. 

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.
Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

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