For Thursday’s Sell Block segment, Cramer introduced another pairs trade in the same vein as last week’s “sell LIZ , buy URBN ” call. Now it’s time to sell Anheuser-Busch and buy Molson Coors, he said.
Why sell the reigning king of the beer market? Because it’s finally getting some real competition. TAP and SABMiller are combining their U.S. operations in a joint venture called MillerCoors that’s going to eat away at BUD’s market share – MillerCoors will have about 29% of the pie, still a far cry from BUD’s dominant 48% but leaving room for improvement (before the deal, Coors only had 11% of the market).
TAP wins on rest-of-world exposure, too. Around 55% of its revenues come from overseas, compared to BUD’s paltry 7%. As far as Cramer is concerned, that fact alone justifies buying TAP over BUD.
BUD isn’t a broken company by any stretch, but it is suffering from some internal woes that make Cramer worry. Its huge investment in Mexico’s Grupo Modelo, parent of Corona, is hurting the company in its U.S. sales as people pare back on expensive beers and buy the cheap stuff instead (who said Natty Light was just for broke college kids?).
BUD also suffers from market saturation in the U.S. – simply, it can’t get much bigger than it is already. At the same time, TAP’s growth is being catalyzed by its venture with SABMiller as well as its dominant overseas sales. Which would you rather own: the long-time market leader that’s now stuck in the mud or the up-and-coming competitor nipping at its heels?
If you want to sell like the pros, dump your BUD shares to make room for TAP, the new king of beers.
Questions for Cramer?
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