SABMiller (LSE: SAB)shareholders are not having the best of times, but I keep faith in the brewer.
Elsewhere, a relatively high-beta stock such as ARM (LSE: ARM), has come under pressure in recent days but at 1,128p a share, I would still retain exposure.
Better Than Most
Growth is a problem, but SAB isnt any different from most of its rivals. Its a difficult point in the business cycle for the beer industry: less effective price and volume policies jeopardise revenues, cash flows and earnings.SAB trades at 22x forward earnings, and at 14.5x based on its adjusted operating cash flow it is slightly more expensive than AB Inbev, but commands a meaningful premium versus Heineken and Carlsberg. Based on fundamentals and other factors, the gap willlikely widen over time, in my view.
At 33 a share, it trades 12% below its 52-week high of 3,857p. At 2.1%, its forward dividend yield looks safe, but is lower than that of AB Inbev.Takeover talksurroundingDiageorather than SAB are likely to favour the former over the very short term, but I wouldnt trust the rumours, while I still prefer SABs prospects.
Growth & Yield
At 1,127p, ARM trades in line with the average price target from brokers. According to consensus estimates from Thomson Reuters, if analysts in the bull camp are right, upside could be as much as 37% but if they are wrong, downside could be as much as 38% from this level. Ive been bullish on ARM for a long time, ever since it traded at around 850p a share, and although its forward trading multiples are demanding, I believe theres still value in ARM, whose margins could grow at a faster rate in the next few years, rendering its stock less expensive over time. ARM reportsreports its interim 2015results on 22 July, and youd do well to add the stock to your wish list right now if you havent done so already.
Elsewhere, Shireis finding it more difficult to create value for shareholders at 5,380p share, yet theres more than one reason why this remains a solid play against volatility. Its one of the most efficient pharmaceuticals plays in the marketplace, and I support its capital allocation strategy. Speculation has it that Shire could targetSwiss biotech company Actelion (which is up 9% on Monday on the back of takeover chatter), but Id invest in Shire due to its appealing valuation and strong fundamentals, which make it for an ideal long-term value investment.
If stocks in the FTSE 100 are not on your wish list, I suggest you look atBetfair, whosestock wasdown 5% on Friday, as some brokers have turned bearish on strategy. While its true that Betfair, which trades at 2,550p, is not exactly in bargain territory, weakness in its stock price is the inevitable price to pay for a rally that,as I expected, has determined a stellar performance in recent times the shares are up119% over the last 12 months. While you may be tempted to take some profit (Betfair trades well above the average price target from brokers), consider that consensus estimates have risen 66% to 21.4p over the last 12 months, and further upgrades should not be ruled out. Its 2015 full-year results are due on 17 June.
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