NEW YORK (CNN/Money) -
Need a safe play when interest rates are rising? Buy Bud. Need a safe play when they're falling? Bud is it again. Same thing in the middle of a bear market, or even when the bulls are back in charge.
What gives?
Like others in the non-cyclical portion of the consumer staples sector, Anheuser-Busch, ticker BUD -- best known for beer, but also the parent of SeaWorld, Busch Gardens, and packaging and real estate units -- has held up well regardless of the economy.
Both the company and the stock have consistently performed well in difficult times, including rising interest rate environments. Like the one we're in right now.
So-called "real" interest rates have already risen, as evidenced by things like the rise in mortgage rates, and all signs point to the Federal Reserve boosting the fed funds rate fairly soon. The Fed Funds futures contract shows a 100 percent likelihood that the central bank will raise rates by 25 basis points at the conclusion of its upcoming June 29-30 meeting. Conservative estimates say rates will rise by 75 basis points this year.
While no one is forecasting stock market hell to break loose as rate rise, there are certain sectors and stocks that will get stung and others that will perform better as the Fed tightens. (For a more detailed look at these, click here.)
Good old Anheuser-Busch (BUD: Research, Estimates) seems set to do fine.
During the Fed tightening cycles of 1994-1995 and 1999-2000, Bud gained, whether or not the stock market did. During the three-year bear market of 2000 through 2002, Bud gained, even when most stocks declined. (See chart).
"It's one of my favorite companies, and I think it's been undervalued for a while," said Elizabeth Wang, a beverage analyst at stock and fund tracker Morningstar.
"Last year, people walked away from defensive stocks and in the meantime, Bud has continued to do what it always does, which is increase market share, grow profits and market its products well."
Bud through the ages
Anheuser-Busch is certainly not the most exciting stock, but it is consistent. Rain or shine, bear or bull, people choose to eat, smoke and be merry, i.e. drink.
In the last 20 years, the stock has only had one down year, in 1993, when it fell by a whopping 1.5 percent.
The company is the world's largest brewer and it keeps growing. Last year, its U.S. market share of the brewing market, not including exports, was around 50 percent. Because its primary market is the United States, it's not too sensitive to currency issues and doesn't have to worry as much about international growth.
In addition to scope and reach, Bud's earnings and dividend growth have been consistent as well.
Standard & Poor's has Bud marked A+ for quality, meaning that its in the top category of stocks over the last 10 years in terms of its consistent ability to grow earnings and increase its dividend.
Analysts expect the company to grow earnings around 11 percent per year over the next five years, and for dividend growth to expand with the earnings.
"Look, Bud is not going to register 25 or 30 percent earnings growth year-to-year, so if you're looking for thrills and chills, Bud is not it," Wang added. "But if you're looking for something that delivers steadily, Anheuser-Busch is a good bet."
As for the stock, Morningstar's Wang sees it fairly valued relative to earnings at about $64. It trades currently at $54. Morgan Stanley recently raised its rating on Bud to "overweight" from "equal weight," citing it as a good defensive play.
And the company is looking to expand internationally.
Last week, it beat out the parent company of Miller beer in a takeover battle for Harbin Brewery, China's fourth-largest brewer. Some analysts argue that Anheuser-Busch overpaid for Harbin, nonetheless, China is the world's biggest beer market by volume and is growing by around 6 percent each year. The Harbin purchase gives Anheuser-Busch a stronger foothold in that market.
However, CNN/Money would be remiss if we didn't mention one potential drawback to investing in Bud this year: the dreaded Daytona 500 curse.
Like other highly questionable, but nonetheless occasionally accurate market predictors -- including the Super Bowl indicator and the hemline indicator -- the Daytona 500 curse is something to be considered, and perhaps, feared.
Over the last 15 years, the company that sponsored the winner of the Daytona 500 has lagged the broader market the following year 13 times, and by an average of 28 percent. The two times the winner's sponsor outperformed the market, it did so by only the slimmest of margins.
Guess which company sponsored the winner this year?
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