- I purchased shares of Molson Coors during the third quarter, and this mid-tier brewer is valued attractively at less than 8x EBITDA, at the low end of historical multiples.
- I do not expect a lot of growth from this investment, but it is challenging to find fairly-priced resilient businesses in the current environment, and if there is one thing I can count on is that people will drink beer, especially during a pandemic.
- The hard seltzer category is growing mid-teens percent annually right now, and I believe Molson Coors has enough irons in the fire here to make a decent impact on their top and bottom lines.
The following segment was excerpted from this fund letter.
MOLSON COORS
I purchased shares of Molson Coors (NYSE:TAP) during the third quarter, and this mid-tier brewer is valued attractively at less than 8x EBITDA, at the low end of historical multiples.
I do not expect a lot of growth from this investment, but it is challenging to find fairly-priced resilient businesses in the current environment, and if there is one thing I can count on is that people will drink beer, especially during a pandemic. The biggest risk is obviously that they may choose to drink other types of beer, specifically craft beers. While the company’s balance sheet is a little stretched, I believe the company is focused on reducing debt, most noticeably in their decision to suspend their dividend for 2020. I do not believe this investment will provide explosive returns for us, but I believe it is an attractive alternative to cash. The company can pay down significant amounts of debt fairly quickly and deliver reasonable equity returns by doing so.
