Billionaire Richard Chilton’s Chilton Investment Company, with some $9 billion in assets under management, recently disclosed its 13F filing, presenting this hedge fund’s portfolio of holdings at the end of the first quarter. Chilton’s portfolio at the end of the quarter was fairly diversified and included a number of stocks that offer respectable dividend yields. Chilton is an avid value investor focused on companies boasting organic sales growth, pricing power, good return on invested capital, wide moat that results in resilience through business cycles, and shareholder-friendly capital deployment strategies. Here is a closer look at Chilton’s four bullish bets with yields above 2.0% in which Chilton boosted his ownership stakes during the prior quarter; learn why some investors piggyback hedge fund sentiment.
In the first quarter, Chilton boosted his share ownership in Anheuser-Busch InBev NV (ADR) (NYSE:BUD), the world’s largest brewer, by 68% to exactly 838,214 shares. This share accumulation took place in the quarter in which Anheuser-Busch InBev NV (ADR) (NYSE:BUD) was hit by a U.S. Department of Justice lawsuit aimed at blocking the beer maker’s acquisition of the remaining 50% stake in Mexican Grupo Modelo SAB de CV. The lawsuit sought to prevent the acquisition on the grounds that it could lead to higher U.S. beer prices. Anheuser-Busch InBev NV (ADR) (NYSE:BUD) was able to settle the case with the DOJ following its deal with Constellation Brands, Inc. (NYSE:STZ), whereby Constellation Brands, Inc. (NYSE:STZ) agreed to acquire control of Grupo Modelo’s brands in the U.S. for $2.9 billion. The leaner Anheuser-Busch InBev NV (ADR) (NYSE:BUD), after the adjusted Grupo Modelo deal, will still have control of the popular Grupo Modelo’s beer brands, such as Corona Extra, that give it access to fast-growing markets in Latin America.
We like Anheuser-Busch InBev NV (ADR) (NYSE:BUD)’s wide moat in the beer markets of the United States and Brazil. Anheuser-Busch InBev NV (ADR) (NYSE:BUD) controls nearly half of the U.S. beer market and more than two-thirds of the Brazilian beer market. Despite the disappointing first-quarter sales growth of 1.5% year-over-year and cuts in Brazilian outlook for this year, the company has a fairly strong pricing power, which is expected to support higher margins going forward, in particular in the United States. The company’s margins are pretty high—its gross margin is 58% and operating margin is 32%. The Grupo Modelo acquisition is also expected to yield cost and revenue benefits amounting to at least $1 billion annually. The company’s innovation pipeline is healthy, and its potential for growth in premium brands in China is large. Anheuser-Busch InBev has robust cash flow generation. Its current dividend is yielding 2.0% on a payout ratio of 39% of the current-year EPS estimate.