It’s not easy being picky. I’ve just spent the morning looking at Mothercare (LON:MTC) and still can’t decide whether to invest or not. It’s either a speculative but screaming bargain, or a value trap with a UK business which could suck cash out of the good part of the business (the high growth international bit).
After shoving the Mothercare paperwork to one side, my thoughts turned to beer… and then I noticed SABMiller’s recent report. Their string of good news made me smile and reminded me why I like to stick with ‘best of the best’ companies and leave the Mothercares of the world to those far more intelligent than I.
In case you don’t know, Sabmiller (LON:SAB) is one of the world’s leading brewers, with over 200 brands, 75,000 employees and a listing in the FTSE 100. A quick look at the results over the last ten years shows that it’s a monster compounding machine and the recession has done very little, if anything, to slow them down. If you flick through the results via your favourite info-portal you should be impressed. But there’s more to investing than just saying “wow look at that growth”, so let’s get down and dirty with a systematic approach and a calculator, and use a few standards that Ben Graham himself thought of, and which are time tested and infinitely sensible.
Invest in a diversified group…
Of course this bit depends on what you’ve already got in your portfolio. In my case I don’t own any beer/wine companies but I do own Robert Wiseman Dairies (LON:RWD) which sells milk, but I can’t see any meaningful crossover between those two markets so that’s okay.
Geographic diversification can sometimes be a nice bonus so that the portfolio isn’t too affected by the problems of any one region. In this case, SABMiller are a global company selling beer mostly to North and South America, Europe and Africa, which helps tick that box.
Of large and prosperous business…
SABMiller is in the FTSE 100, so it’s huge. As for prosperous, there are various ways of measuring this but some of them could include the fact that it:
- hasn’t made a loss in ten years
- always pays a dividend
- has grown at something like 13% a…
