If you’d invested in SABMiller (LSE: SAB) (NASDAQOTH: SBMRY.US) at the start of the year 2000, a remarkable thing would have happened — the price of your shares would have gone on to beat the FTSE 100 for 12 years in a row!
Obviously that can’t happen forever, as the shares would become more and more overvalued compared to the rest of the market, and SABMiller shares fell back a little in 2013. But even allowing for that, here’s what’s happened to the shares over the past 10 years:
Now, over a decade, that’s a compounded annual growth rate of about 17% — and if we saw the same performance every year for the next 20 years, we’d turn every £1,000 of our ISA cash invested in SABMiller today into £23,000!
And that’s without including annual dividends of around 2% per year.
Future growth
Of course, that’s not quite going to happen. I think SABMiller still has good growth prospects, but with the shares currently changing hands for £30 apiece, we’re looking at a price to earnings ratio (P/E) of nearly 21 for the year just ended, dropping to 17 based on 2016 forecasts. So the expected future growth is largely already accounted for in the share price, and the days of screaming undervaluation are behind us.
Emerging markets
But with the best long-term ISA strategy being to look for companies that will still be around and profitable in 20 or more years time, does SABMiller still have what it takes?
Well, the brewer is focused in some of the world’s most promising growth markets — 20% of the firm’s turnover in 2013 came from its native South Africa (SAB = South African Breweries). And it does own a number of top brands — including Pilsner Urquell, Peroni, Grolsch and, of course, Miller.
Worth how much?
So yes, I reckon SABMiller is worth considering for a chunk of that new £15,000 ISA allowance coming our way in July. Even if we see a share price growth of just 5% per year (which is lower than the next three years of earnings growth forecasts), together with 2% per year in reinvested dividends we could still turn £1,000 into £3,900 over 20 years.
