Potential Lawsuit Could Spell Trouble for Anheuser-Busch InBev (BUD); Check Out These 2 Stocks Instead

In a piece on April 30, we discussed how an ill-fated decision by Anheuser-Busch InBev SA/NV (BUD) to feature trans influencer Dylan Mulvaney in an ad campaign to celebrate the end of March Madness and promote a sweepstakes contest for its brand, Bud Light, stirred up controversy and outrage from outspoken conservatives over transgender rights.

Earnest efforts to contain damage and restore its brand image included parting ways with two top marketing executives who supervised the ad campaign and releasing an ad featuring its signature Clydesdale horse mascot to invoke patriotic sentiments in its patrons.

However, amid widespread calls for a boycott, Bud Light has seen its sales plummet by about 25% from the previous year, according to data from consulting firm Bump Willams. Consequently, the beer maker lost its top spot in the U.S. beer market last month to Modelo Especial by Constellation Brands, Inc. (STZ), and its parent BUD saw its shares fall from roughly $66 to $58.

While BUD believed that it might have seen the worst and that the backlash would eventually blow over, with 2024’s race to the White House underway, given the recent noise surrounding the beverage company, it ended up courting further unwanted attention.

Florida’s Governor, Ron DeSantis, who is also running for the Republican presidential nomination while riding a wave of anti-"woke" rhetoric, has been involved in a legal tussle with The Walt Disney Company (DIS) for over a year over alleged “targeted campaign of government retaliation” after the company’s former CEO spoke up about the state's classroom (so-called "Don't Say Gay") education bill.

To add fuel to his efforts to hold accountable corporations and other entities he deems are pushing “woke” progressive political ideology, the governor has now trained his guns on BUD.

DeSantis, who oversees the board of the Florida Pension Fund as a trustee along with the state’s attorney general and chief financial officer, both also Republicans, has accused the company of neglecting its stakeholders and pensioners by associating with “radical social ideologies.”

By ordering his government to investigate whether BUD breached its duties to shareholders, the conservative politician could potentially bring a derivative lawsuit against the company on behalf of the fund's shareholders.

In his letter to Lamar Taylor, the interim director of the State Board of Administration, the state agency that manages Florida’s retirement funds for public workers, DeSantis wrote, “We must prudently manage the funds of Florida’s hardworking law enforcement officers, teachers, firefighters, and first responders in a manner that focuses on growing returns, not subsidizing an ideological agenda through woke virtue signaling.”

Since, in the words of DeSantis, “All options are on the table and woke corporations that put ideology ahead of returns should be on notice,” BUD’s time in turbulence seems unlikely to end anytime soon.

The company responded, “Anheuser-Busch InBev takes our responsibility to our shareholders, employees, distributors, and customers seriously.” The spokesperson further added, “We are focused on driving long-term, sustainable growth for them by optimizing our business and providing consumers products to enjoy for any occasion.”

While DIS’ current CEO, Bob Iger, has expressed his determination to back and persist with his company’s legal challenge, a stance that has even been appreciated by Nike’s CEO, it remains to be seen how BUD responds to being in political crosshairs and under legal fire.

According to experts, changing demographics suggest that Bud Light’s inclusive ad campaigns make good sense in the long run and are expected to keep the brand in what, according to BUD’s CEO, is “the business of bringing people together over a beer.”

However, the soup the brand has landed in might warm up the prospects of two other beverage stocks. While the “woke-free” beer being brewed by “Conservative Dad” may not make the cut, here are some contenders to look out for.

Heineken N.V. (HEINY) is a beverage company headquartered in Amsterdam, Netherlands, that is involved in brewing and selling beer. Its offerings consist of beer, soft drinks, and cider. The company operates through five segments: Africa, Middle East & Eastern Europe; Americas; Asia Pacific; Europe and Head Office; and Other/eliminations.

On May 31, HEINY announced the completion of the purchase of its shares worth €333 million ($368.35 million) from FEMSA as part of the sell-down offering by the latter. The purchase, which was funded from HEINY’s existing cash resources and credit facilities, could increase the intrinsic value of the holdings of existing shareholders.

On April 26, HEINY announced the completion of its acquisition of Distell Group Holdings Limited (Distell) and Namibia Breweries Limited (NBL), which have been combined with HEINEKEN South Africa into a new HEINEKEN majority-owned business to capture significant growth opportunities in Southern Africa.

The combined businesses will be known as ‘HEINEKEN Beverages. The rebranding reflects the new company’s multi-category portfolio and commitment to delivering high-quality beverages to consumers across the continent.

Ahead of its July 31 earnings release, HEINY’s revenue for the fiscal second quarter is expected to increase by 33% year-over-year to $9.39 billion. For the entire fiscal year, both revenue and EPS are expected to increase by 15.1% and 16.5% year-over-year to $35.28 and $2.91, respectively.

Ambev S.A. (ABEV), a subsidiary of Interbrew International BVT, is a beverage company headquartered in Sao Paolo, Brazil, that distributes and sells beer, carbonated soft drinks (CSDs), and other non-alcoholic and non-carbonated (NANC) beverages across the Americas. The company operates through three geographical segments: Latin America North; Latin America South; and Canada.

On April 25, ABEV’s Board of Directors approved and homologated the issuance of new common shares as a result of the exercise, by certain beneficiaries, of stock options, within the scope of the company’s Stock Option Plan. This reflects the investors’ confidence in the company’s prospects.

Consequently, on May 18, ABEV announced a share buyback program for the repurchase of shares issued by the company up to the limit of 13,000,000 common shares with the primary purpose of covering any share delivery requirements contemplated in the company's share-based compensation plans or to be held in treasury, canceled, and/or subsequently transferred.

Ahead of its earnings release on August 3, analysts expect ABEV’s revenue to increase by 17.2% year-over-year to $4.03 billion. The company’s revenue is expected to grow by 15.9% year-over-year to $17.73 billion for the entire fiscal year. Moreover, the company has surpassed consensus EPS estimates in each trailing four quarters.

Creating the Optimal Trade for Explosive Profits

If you could develop a low-risk plan that would lead to consistent trading profits, you would probably jump at the opportunity. Now you can with a method designed to reduce stress (the key to successful trading) and emulate the traits of the most successful traders in the world.

In this fast-paced video, you'll get specific information on how to trade the S&P, T-bond and currency futures contracts. You'll learn how you can use all the instruments available to you to build an arsenal of trading strategies to compete with the most sophisticated traders on the floor.

Learn how to spot high-profit, low-risk trades and how to place and manage trades to keep the odds of winning on your side. George delivers powerful delta neutral and spread strategies in a clear and concise presentation. This video is both entertaining and informative!

As a trading instructor, there is no one better than George Fontanills! He has spent years perfecting his strategies for reducing risk. George thoroughly enjoys teaching others how to become more successful in their trading.

WATCH NOW: Creating the Optimal Trade for Explosive Profits

The INOTV Team

22% Return In 11 Days And This Is Just The Start!

Here at INO.com, we are often asked about options trading and whether our premium service, MarketClub, can be used to trade options. While MarketClub does not carry stock options specifically, the truth is, many people have had a great deal of success trading options with MarketClub. One person in particular, who you are about to meet below, has done so for years and even helped teach others how to thrive using options.

This could be the first of many articles! We're trying to gauge interest in options trading with MarketClub, so we'd like to encourage you to participate in our poll.

Are you interested in learning more about options trading with Trader Travis and MarketClub?

View Results

Loading ... Loading ...

Hello my name is Trader Travis. Today I want to share with you the secret to how you could have used MarketClub and stock options to earn a 22% return on investment in just 11 trading days.

Sounds unbelievable, but if I hadn't experienced this first hand I'd still be in disbelief.

I'm not sure what your particular financial situation is, but maybe you're one of the many people who are afraid you won't be financially independent at some point in your life, or maybe you're afraid of losing money in the stock market (again) and would like to know how to guarantee you won't lose money...

If so, would you like to learn how to create true financial freedom and an income source you control? Continue reading "22% Return In 11 Days And This Is Just The Start!"

Do you know how your trading is taxed?

By: Traders Accounting

Traders spend a lot of time and money learning their trade. They take courses to learn how to make money in the market and realize their dreams of working for themselves. While traders try to learn about every aspect of their trading strategies they often overlook one important area. This frequently overlooked area is one which can cost a trader a significant amount of their hard earned profits.  If you have not guessed it yet we are referring to taxes. Many traders don’t fully understand how their trading activities will be taxed until they have received their tax bill and it is too late. This article will supplement your trading education by explaining the tax treatment of many commonly traded instruments.

Stocks, Stock Options, Exchange Traded Funds (ETFs), and Options on ETFs: Continue reading "Do you know how your trading is taxed?"

4 Ways Options Are Better than Stocks

Just why are options so great in the first place? If you're still on the fence about trying your hand at options, this is a must-read article provided by Elizabeth Harrow of Schaeffer's Investment Research. If you enjoy this article and want to learn more about options you may even want to check out their options newsletter!


Options are cheaper than stocks.

In this economy, everybody's trying to save money. So, forgive me for pandering, but it's a fact that options are significantly less expensive than the securities on which they're based. Each option contract gives you control of 100 shares of equity, yet the cost to purchase an option contract is nowhere near the expense of buying an equivalent chunk of stock.

Premium: The price of an option contract that the buyer of the option pays to the option seller for the rights conveyed by the option contract.

When you purchase an option contract, you pay a premium to enter the trade. This premium is known as the ask price, if you're buying to open, and it's determined in the traditional manner by supply and demand.

By way of example, let's take a look at options on imaginary retailer You-Can't-Afford-It Stores Inc. (POSH). Let's say POSH closed yesterday at $46.39. It would cost you $4,639 to purchase 100 shares. By comparison, POSH's May 47.50 call closed yesterday at $1.83. (Hey, it's my imaginary case study: I get to pick the numbers.) In other words, it would cost you just $183 to purchase this call option granting you control of 100 shares of POSH.

As fair warning, I'm not a math expert, but I'm pretty sure you could save about $4,456 by purchasing the call option rather than investing in the shares outright.

Maximize your profits through the amazing power of leverage.

In addition to being cheaper than stocks, options also provide you with the magic of leverage. This nifty feature allows you to collect profits that are, in the best-case scenario, way out of proportion to your initial investment.

Leverage: The control of a larger number of shares with a smaller amount of capital. Leverage provides an option buyer greater profit potential using fewer dollars compared to holding a long or short stock position.

Sticking with our POSH example from above, let's say that Jill Trader purchased 100 shares at $46.39 for a total cash outlay of $4,639. Meanwhile, Susie Speculator bought to open 1 May $47.50 call for a total outlay of $183 ($1.83 x 100 shares per contract).

OK, bear with me, because we're going to have to use our imaginations for this next bit. Let's pretend that POSH rallies up to $55 per share by May expiration. Jill Trader unloads her 100 shares for $5,500, content in the knowledge that she's netted a profit of $861 (which translates to 18.6% of her initial investment).

Meanwhile, Susie Speculator sells to close her option contract, which is now worth $750. Susie's profit is $567, or 322.7% of her initial investment. Not only did Susie invest less capital than Jill, she more than tripled her trading dollars. Not too shabby, right?

And, if you can believe it, there are even more reasons why options are inherently superior to stocks…

Downside risk is limited in many option strategies.

At the risk of beating a dead horse, let's reverse our earlier scenario. Pretend that POSH shares plunge during the next 6 weeks, and by the time May-dated options expire, they're wallowing at $33 per share.

When you buy to open an option that expires worthless, your loss on the trade is limited to your initial cash outlay.

Our hypothetical investors have a very different reaction to the stock's slide. Jill Trader is panicking, because she's already lost $1,339 on paper, and the decline doesn't show any signs of slowing. She's faced with the choice of swallowing a big loss, or waiting it out and hoping the shares turns around.

Elsewhere, Susie's disappointed, but not devastated. She simply allows her out-of-the-money call to expire worthless, which means that her total loss on the trade amounts to no more than her initial investment of $183. It's not her best trading result ever, but it's definitely a more palatable outcome than Jill's.

Feel free to stop caring about price/earnings ratios.

At this point, I'm going to stop throwing math problems at you. Frankly, I find it exhausting, and I'm quite sure my endlessly patient colleague, Jocelynn Drake, is tired of checking my numbers. However, we will be discussing a few specific figures, namely: price/earnings ratio, price/book ratio, price/sales ratio… the list goes on.

Now, if you're used to investing in stocks, you're no doubt accustomed to researching the aforementioned ratios. These metrics offer clues as to whether a stock is overvalued or undervalued at current levels, and many traders will analyze these fundamentals before entering a position.

For all the reasons mentioned above(plus a few more), you have my full permission to throw these fundamentals out the window(well, mostly) when trading options. The fact is, these metrics simply don't matter as much to an option trader as they do to a buy-and-hold stock investor.

Let me explain. Thanks to your lowered initial investment, as well as the magic of leverage, you have a simple goal when you buy a call option. You want the share price to rise above the strike price prior to expiration, allowing you to collect your profit and exit the trade.

So, since you're not investing in the company for the long run, the traditional trading metrics shouldn't have much bearing on your analysis. So what if POSH's price/earnings ratio of 19 is higher than the average for its peer group? Even if the shares are expensive now, you can still reap a profit as long as they're more expensive by the time your option expires.

Instead, since we want the stock's price to make a fast, aggressive move in the right direction, we favor the Expectational Analysis method. By combining technical analysis with sentiment analysis, you can pinpoint equities that are poised to rally...or plunge, if you're playing puts.

Of course, fundamentals do play a part. If you're buying options ahead of earnings, you should be aware that premiums might be inflated by rising implied volatility. Or, if the pharmaceutical firm that you're buying calls on is due to release trial data within the next week, you should definitely have that event on your radar, too.

But, beyond the basics, you can really stop sweating the fundamentals. If you love crunching the numbers, though, don't worry. With put/call volume ratios, put/call open interest ratios, and more, there are still plenty of metrics for an option trader to play with.

Click here for 6 months free of Bernie Schaeffer's Option Advisor and A Crash Course in Top Gun Trading Techniques.

Best of luck to you with your options trading,
Schaeffer's Investment Research Team