Dave Sather of Sather Financial Group presented his in-depth investment thesis on Brown-Forman (US: BF.B) at Best Ideas 2019.
Brown-Forman is an American spirits company that owns several brands, the largest of which is Jack Daniel’s.
Jack Daniel’s generates roughly 60% of the firm’s cases sold worldwide and has become a foundation for the growth of both new Jack Daniel’s products, such as Honey and Fire, and other brands owned by Brown-Forman.
The stock rarely trades at fair value but headwinds involving a 25% tariff on bourbon exports to Europe and a CEO transition have caused a 20% price decline since May. Given the inelastic demand of the industry and resilient staying power, the recent drop in price gives investors an opportunity to buy an extremely durable business at what Dave considers to be fair value.
The firm benefits from cost advantages associated with producing premium products and strong brand appeal which yields margins higher than competitors who generate revenue nearly 5x that of Brown-Forman. It’s existing value chain allows for newer brands to piggy back off of Jack Daniel’s in markets that are estimated to yield 10%+ CAGR’s over the next five years. Much of this growth stems from increased global demand, taking market share from global competitors, and consumer preference changes in the U.S. shifting from beer to higher end spirits.
Management has also prioritized returning value to shareholders by both reducing outstanding shares by 16% and more than doubling its dividend since 2008 and intends on continuing this capital allocation strategy. These factors have earnings estimated to grow between 10-15% over the next few years.
The full session is available exclusively to members of MOI Global.
Members, log in below to access the full session.
Not a member?
Thank you for your interest. Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:
About the instructor:
Dave Sather is a CFP and President of Sather Financial Group, a $600 million firm managing individual accounts, in Victoria, Texas. Dave has degrees in business from Texas Lutheran University and Texas A&M University. Dave is also Chairman of the Board of Business Bank of Texas and serves on the Investment Committee and Board of Regents at Texas Lutheran University. He developed and teaches the Bulldog Investment Company internship at Texas Lutheran University (www.BulldogInvestmentCo.com).
About The Author: MOI Global Editorial Team
The MOI Global Editorial Team, led by John Mihaljevic, CFA, includes community builders, event organizers, writers, editors, research associates, security analysts, and fanatical member support advocates. Our sole purpose is to serve the members of MOI Global as well as we possibly can in order to help them learn, invest intelligently, and build lifelong friendships with like-minded people.
Who is MOI Global? In recent years, The Manual of Ideas has expanded to become more than simply “the very best investing newsletter on the planet” (Mohnish Pabrai). We are now a thriving global community of intelligent investors, connected through great ideas, thought-provoking interviews, online conferences, live member events, and much more.
Members of MOI Global enjoy complimentary access to a growing array of resources and content related to the art of intelligent investing. Members also enjoy preferential access to selected offline events as well as exclusive access to other events hosted by MOI Global, including the Zurich Project Summit, the Latticework Conference, and Ideaweek.
More posts by MOI Global Editorial Team