4. Molson Coors Beverage Company (NYSE: TAP)
Value: $6,779,000
Percent of Michael Burry’s 13F Portfolio: 3.02%
Number of Hedge Fund Holders: 39
Michael Burry bought 150,000 new shares of Molson Coors in the fourth quarter, ending the period with a $6.78 million stake in the company. The beverage company is behind several famous brands like Carling, Coors Light, Miller Lite, Molson Canadian and Staropramen. Molson Coors shares are up 19% over the last 12 months. The company posted weak Q4 results as it increases spending on new products. Last year, the company suspended its dividend, but the management now plans to recommend a resumption in dividend payments in the second half of 2021.
As of the end of the fourth quarter, 39 hedge funds in Insider Monkey’s database of 887 funds held stakes in TAP, compared to 33 funds in the third quarter. Arrowstreet Capital is the biggest stakeholder in the company, with 2.4 million shares, worth $108.6 million.
In their Q3 2020 investor letter, Argosy Investors highlighted a few stocks and Molson Coors Beverage Co (NYSE:TAP) is one of them. Here is what Argosy Investors said:
“I purchased shares of Molson Coors (TAP) during the third quarter, and this mid-tier brewer is valued attractively at less than 8x EBITDA, at the low end of historical multiples.
I do not expect a lot of growth from this investment, but it is challenging to find fairly-priced resilient businesses in the current environment, and if there is one thing I can count on is that people will drink beer, especially during a pandemic. The biggest risk is obviously that they may choose to drink other types of beer, specifically craft beers. While the company’s balance sheet is a little stretched, I believe the company is focused on reducing debt, most noticeably in their decision to suspend their dividend for 2020. I do not believe this investment will provide explosive returns for us, but I believe it is an attractive alternative to cash. The company can pay down significant amounts of debt fairly quickly and deliver reasonable equity returns by doing so.
Additionally, the company recently got into the hard seltzer game, specifically through their Vizzy and Coors Seltzer products. The author took the opportunity to sample these products over the Labor Day holiday, and came away impressed with the decent flavors, and subsequent conversations with millennials and particularly millennial females who had tried the product reflected positive early feedback for these offerings. Finally, Molson Coors announced a partnership with Coca-Cola to develop their Topo Chico hard seltzer product. The hard seltzer category is growing mid-teens percent annually right now, and I believe Molson Coors has enough irons in the fire here to make a decent impact on their top and bottom lines. Any amount of unexpected growth from these products would be a cherry on top to our investment case.”
