If Americans ever develop proper taste might Jack Daniels (BF) be toast and the stock never result in attractive returns from here? Especially when I see JD at $100+ a bottle I believe there are much much better alternatives.
Disc.: I never invested in sbux and many other things because of my (bad) personal taste
That is a risk that future generations will not have the same drinking habits! That's a big question right now, are sales slowing because future generations are not drinking, or is it because customers bought so many bottles of Jack Daniel's during the pandemic that they do not need to buy more for another year?
My other point was that industries with declining volumes can still be good investments, like auto part stores (AZO, ORLY) or gas stations (CASY, MUSA). Those companies have the risk of electric vehicles looming over them. So, even if future generations do not like Jack Daniel's as much, it will likely be a 30-40 year transition and it is not likely to happen over night.
Some of my best investments have been in companies that go against my personal taste, like Apple (AAPL) for example. I do not like Apple products, but I really like how much the stock has returned for me!
Yeah, I was not so much referring to future generations not drinking as much but more to my personal view that Jack Daniels is not at all good whisky in my (most Europeans?) view. Than again, I also hate apple products (also Starbucks, MCD, Facebook, many others) and missed big returns as an investor.
So, the PPL in the US who still like whisky might replace it with other brands. Anyway, with small growth why should such high multiples (PE) be justified?
I see. Yeah, the brand has been around over 150 years facing various competitors, yet it continues to be ranked by International Wine and Spirits Research as the bestselling American whiskey brand in the world. In addition, Jack Daniel's sales were growing over 20% during the pandemic, which is amazing for such an old brand!
In terms of the P/E multiple, it typically gets a premium multiple with "small growth" because of the sustainable, long-duration nature of that growth, along with higher returns on invested capital than the average company.
Pernod Ricard is cheaper, but I have BF/A and BF/B on my watch list. Someone took a run at Brown and Forman a few years back. I may have been Constellation, but I am probably wrong. Given the share structure and large ownership they were able to fend it off. I would own it at a lower P/E, preferably under 20X.
Nice write-up! I agree that investors are probably over-reacting to Gen-Z drinking patterns (who are still early in that phase). Considering there isn't the push against alcohol like there was Big Tobacco years ago, I think this is just part of the ebb-and-flow cycle for this company. I will be watching this one going forward for any changes in the cycle. Keep up the good work!
Thank you for reading and for the comment! That is what I'm leaning towards being the case. The stock is all the way back to the pandemic-low price and possibly a candidate for tax-loss selling before year-end. Could get very interesting!
If Americans ever develop proper taste might Jack Daniels (BF) be toast and the stock never result in attractive returns from here? Especially when I see JD at $100+ a bottle I believe there are much much better alternatives.
Disc.: I never invested in sbux and many other things because of my (bad) personal taste
That is a risk that future generations will not have the same drinking habits! That's a big question right now, are sales slowing because future generations are not drinking, or is it because customers bought so many bottles of Jack Daniel's during the pandemic that they do not need to buy more for another year?
My other point was that industries with declining volumes can still be good investments, like auto part stores (AZO, ORLY) or gas stations (CASY, MUSA). Those companies have the risk of electric vehicles looming over them. So, even if future generations do not like Jack Daniel's as much, it will likely be a 30-40 year transition and it is not likely to happen over night.
Some of my best investments have been in companies that go against my personal taste, like Apple (AAPL) for example. I do not like Apple products, but I really like how much the stock has returned for me!
Thanks for reading and for the comment!
Yeah, I was not so much referring to future generations not drinking as much but more to my personal view that Jack Daniels is not at all good whisky in my (most Europeans?) view. Than again, I also hate apple products (also Starbucks, MCD, Facebook, many others) and missed big returns as an investor.
So, the PPL in the US who still like whisky might replace it with other brands. Anyway, with small growth why should such high multiples (PE) be justified?
I see. Yeah, the brand has been around over 150 years facing various competitors, yet it continues to be ranked by International Wine and Spirits Research as the bestselling American whiskey brand in the world. In addition, Jack Daniel's sales were growing over 20% during the pandemic, which is amazing for such an old brand!
In terms of the P/E multiple, it typically gets a premium multiple with "small growth" because of the sustainable, long-duration nature of that growth, along with higher returns on invested capital than the average company.
Pernod Ricard is cheaper, but I have BF/A and BF/B on my watch list. Someone took a run at Brown and Forman a few years back. I may have been Constellation, but I am probably wrong. Given the share structure and large ownership they were able to fend it off. I would own it at a lower P/E, preferably under 20X.
Yes, I remember that! It was Constellation back in 2017. Thanks for the comment. Maybe we'll see the P/E drop below 20X before year end!
Nice write-up! I agree that investors are probably over-reacting to Gen-Z drinking patterns (who are still early in that phase). Considering there isn't the push against alcohol like there was Big Tobacco years ago, I think this is just part of the ebb-and-flow cycle for this company. I will be watching this one going forward for any changes in the cycle. Keep up the good work!
Thank you for reading and for the comment! That is what I'm leaning towards being the case. The stock is all the way back to the pandemic-low price and possibly a candidate for tax-loss selling before year-end. Could get very interesting!