Jim:
A week ago, I
recommended Fortune
Brands, a pastiche,
if not a mosaic, all
the company... that
makes everything
from Jim Beam,
Makers Mark, Sauza
Tequila... Moen
faucets, Aristocraft
Cabinets, Master
locks, golf balls,
golf shoes...
Fortune Brands is
another one of what
I call those
accidentally high
yielders...
This is going to be
the theme for
2009... This is a
stock with a once
puny dividend but,
because of an
enormous decline in
its share price, now
yields a mighty
4.6%...
When I recommended
this one, I told
you... I thought you
should buy it on the
way down... because,
as the share price
falls, the yield
grows... and, at $38
and change, the
stock is off two
points from $40.72,
where I said that I
liked it last
week...
That's perfect. We
wanted to go down so
that we can get more
of it at our
price...
See all
of
tonight's
stocks
mentioned
on
Yahoo!
Finance,
here...
Monday,
December 15, 2008
(Cont'd from
above)...
Jim (cont'd):
We know that the
dividend is good,
because Fortune
Brands upped it by
5% this year, and
companies don't
increase their
dividend right
before they think
they'll have to cut
them... Nothing
ruins your
credibility
faster... although I
was surprised that
Boeing raised its
dividend today... I
sure wouldn't if I
were Boeing...
Plus, next year, the
company's earnings
per share should be
about double the
size of the dividend
payout... that's a
rule of thumb for
assessing dividend
safety...
The case for Fortune
Brands is simple...
it's what's known as
an "early cycle
play"... meaning
that it belongs to a
part of the economy
that bottoms, and
goes up first, when
you get a business
cycle recovery...
The cabinet and
faucet business is
all about housing,
and since we expect
housing to bottom by
June 30 of next
year, I like the
stock ahead of that
turn... plus, in
case we're wrong,
Fortune Brands still
has the very
defensive liquor
business... and that
should do well
during a recession,
in addition to
allowing you to
drink away your
sorrows, if the
stock goes south...
▼ ▼
▼ ▼
▼
But I predict that
hedge funds and
mutual funds, which
all use the same
playbook, will start
buying this one as
we get close to the
housing bottom...
Because, as I
explain in
Real Money: Sane Investing In An
Insane World,
pretty much all the
money managers start
buying early cycle
plays like Fortune
Brands at about this
point in the
business cycle...
The yield, the
liquor,
protection... but
cabinets and
faucets, upside...
Still, when Fortune
Brands reported its
third quarter... a
nice beat, by the
way... the company
slashed its full
year 2008
guidance...
You know what I
think... I think
that this is a
classic case of
underpromise,
overdeliver... but
before I render my
judgment, I want to
talk to Bruce
Carbonari, the CEO
of Fortune Brands...
Mr. Carbonari,
welcome back to Mad
Money...
▼ ▼
▼ ▼
▼
Jim's comments
AFTER the interview:
He's got a great
case for himself. He
is literally the
paradigm of
accidental
yielders... I would
buy Fortune Brands
right here... and
then, if it gets to
5%, you'd better
triple buy... buy,
buy, buy... That's
what I'm looking
for... a stock that
pays while you wait
for a turn, with
great brands and a
product that is 60%
not research and
oriented.
[verbatim recap]
