1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Articles (82) 

The Ultimate Growth Industry

October 12, 2011 | About:
If you want to protect yourself from the demise of the U.S. dollar, you need assets denominated in something other than the greenback.

It is the ultimate growth industry — beer. The nectar of the gods may be one of man's oldest delights, but a very specific sector is growing by double digits each year.

Microbrews are hot.

Get this: Overall, beer sales were down by 1.0% last year. But microbrew sales were up by 11%. The sector was worth $7.6 billion — split among 1,753 breweries.

This year looks even better. During the first six months of 2011, the Brewers Association tells us sales are up by 15%. Better yet, there's an extra 165 breweries in the market, with more on the way.

For the average investor, all this growth doesn't mean much. Unless you want to enter the realm of venture capital, it's tough to tap the microbrew trend.

But it does give us strong clues to where the money is heading.

This chart shows us how Boston Beer Co. (NYSE:SAM) — the closest thing to a publicly traded microbrew — compares to the overall market. Over the past 24 months, it's no competition — beer rules.

The company behind Samuel Adams doubled its investors' money while the overall market was stagnant.

This is an idea that our Steven Orlowski has caught onto. But he takes it a step further. I just finished reviewing his latest issue of Safe Haven Investor (it will be posted online on Monday). In this issue, he takes the idea even further.

He says for the big opportunity, the big growth, look to foreign brewers.

His logic makes sense. It is all about what he calls "true diversification." If you want to protect yourself from the demise of the U.S. dollar, you need assets denominated in something other than the greenback.

... and no, he doesn't recommend using beer as a currency. He recommends buying shares of a foreign brewer on a foreign exchange.

It makes perfect sense, especially if you are looking for diversification. Not only are you buying shares of a company that boasts stable product demand no matter the economy (good times or bad — we drink), but the company is located in a country growing while we're retracting.

"The U.S. economy is expected to lose its place as the king of the hill," Orlowski says, "replaced by China's burgeoning economy, and there is really no telling exactly how things will play out.

"But diversification in a portfolio is not just large-cap, mid-cap and small-cap domestic stocks with a sprinkling of foreign stocks. Diversification means lots of foreign exposure and the best kind of foreign exposure is buying stocks in their native environment."

We need a word of caution here. While the stock Orlowski has his eyes on is in a country that is difficult for American investors to reach, Orlowski would rather not have to buy an ADR — there's no currency diversification.

If you want to protect yourself from the demise of the U.S. dollar, you need assets denominated in something other than the greenback.

He tells his readers, if they have access, to physically buy the stock on a foreign exchange (I'd tell you which one, but his paid subscribers would get testy).

Really, it's not that hard. In fact, in his issue he tells of a one-stop website that offers access to dozens of foreign markets.

Here's a few more off the top of my head:
  • Fidelity
  • E-Trade
  • Interactive Brokers
  • Schwab
Few investors take advantage of the opportunity within foreign exchanges. After all, just five years ago, it was nearly impossible for Americans to get their hands on foreign equities. It was a privilege relegated to the rich or the well connected.

But not today. Now, it's as simple to buy shares of a brewer in India or Germany as it is in New York.

And the timing could not be better. "True" diversification is more important now than ever before. As the American dollar embarks on a long journey into the history books, the smart money is looking for safety elsewhere.

... anywhere but here.

As Steven shows his subscribers, a great niche to focus on is vice stocks. In this case, it's beer — the ultimate growth industry.

Rating: 3.5/5 (11 votes)


Please leave your comment:

Performances of the stocks mentioned by taipan

User Generated Screeners

JFranklinTo Short Stage 4
eae010Forward Growth Edited
bpatton23L/Cap value
AJPringAP screen102017 NO LOW
Nightdoc2Large Value
DBrizan2017 oct20CDN
DBrizan2017 oct20CDN dividend
althekearoct 17 user defined screen
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat