SABMiller plc Could Help You Retire Early

Retirement may not be so long away for shareholders in SABMiller plc (LON: SAB). Here’s why…

Peter Stephens

Having held various senior management positions in the manufacturing sector, Peter founded his own manufacturing company in 1996. This was subsequently sold in 2007. Meanwhile, his passion for investing (which began during the privatisations of the 1980s) remains strong and he couples this with writing for The Motley Fool as a Contractor. His investment style is value-oriented; focusing on company fundamentals, as well as assessing the strength and presence of a competitive advantage. While above-average growth prospects remain very attractive, a greater focus on dividends has crept in since Peter became a part-time retiree in 2007.

Published 12 February, 2014 9:07 am GMT

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

With the UK stock market having made a volatile start to 2014, it could be worth looking at companies that have a defensive slant. In other words, they sell or produce products that are likely to be in high demand whatever the state of the world economy.

One such company is SABMiller (LSE: SAB) (NASDAQOTH: SBMRY.US), purveyor of a wide range of beers across the globe. Over the last 5 years, SABMiller has been able to deliver consistent levels of revenue and profit growth, perhaps because alcoholic beverages are a good product to be selling during both economic booms and recessionary periods.

Indeed, demand for alcoholic beverages tends to remain fairly constant, as people wish to celebrate more often when the going is good, but also choose to drown their sorrows when the economy is going through a rough patch.

Therefore, it’s of little surprise to see the level of consistency that SABMiller has been able to achieve with regard to its top and bottom lines in recent years.

In addition, SABMiller is not overly exposed to one particular region. The importance of this is perhaps diluted because of the aforementioned consistent demand for alcoholic beverages, but a diverse exposure to developed and developing markets across the globe can, nevertheless, only be a good thing for long-term shareholders.

Not only is it likely to mean less risk from changes to customers’ spending habits, it also means that SABMiller is able to tap into higher growth rates in specific regions without overexposing itself to any one part of the world.

SABMiller has all the characteristics of a defensive company, in terms of top and bottom line growth being fairly consistent. However, as a stock it seems to offer the potential for attractive long term gains — especially if investors are bullish on the long-term future of the UK stock market.

That’s because SABMiller has a beta of 1.27. This means that (in theory) its share price will increase by 1.27% for every 1% gain in the FTSE 100. Of course, it also means that SABMiller’s share price should (in theory) fall by 1.27% for every 1% fall in the wider index.

So, SABMiller could be a great stock for long-term equity bulls who are seeking out a company with relatively stable sales and profits. That’s why it could be a stock to help you retire early.