Breakout

4 Ways to Play July 4th

Jeff Macke
Breakout

Perspective can only be gained by standing outside the mix. In recognition of that fact, Breakout sought an American Semi-outsider in the form of native Brit Simon Baker to help us find four ways to play July 4th. Though officially refusing to accept the legitimacy of the event, Baker, the founder of Baker Avenue Asset Management, was able to select a basket of stocks connected not to American liberty, but rather our long-standing commitment to gluttony.

He may have a inherent conflict of interest but here are Baker's plays, in his own words:

Anheuser-Busch InBev (BUD), $79.85, PT $90, SL $75, Div Yield of 1.7%

FACT: 68.3 million: Number of cases of beer sold nationwide on July Fourth, for which Americans will spend $341 million. According to the Beer Institute, the Fourth of July is the top holiday for beer sales, followed by Labor Day, Memorial Day, Father's Day and Christmas.

The world's largest brewer confirmed Friday that it would buy the rest of Mexican brewer Grupo Modelo that it doesn't already own for $20.1 billion, so along with your bud light you can now enjoy a Corona beer from BUD on that other great American holiday Cinco de Mayo.

  • BUD is near its 52 week high and looks strong on its release of Bud Platinum
  • Sales in two strongest markets Brazil & US in Q1
  • Sales were $32 billion in 2011

Kraft Foods (KFT) — $38 .62, PT $45, SL at $35

FACT: 150 million: number of hot dogs the National Hot Dog and Sausage Council says Americans will enjoy on Independence Day, enough to stretch from Washington, D.C., to Los Angeles over five times

Whether it's Oscar Myer hotdog or some A1 on your BBQ steak home, Kraft has its fork in many July 4th staples.

  • Dividend yield of over 3%
  • Free cash flow of $2.6 billion
  • Trades at 19X earnings

Heinz Ketchup (HNZ)$54.38, PT $64, SL $50, Div Yield 3.8%

Nothing says hot dog to an Englishman like Heinz

  • Sales totaled $11.6 billion for fiscal 2012
  • Very strong emerging sales growth accounting for 21% of total sales in 2012 and looking to grow that to 25%
  • Expect free cash flow of $1.1 billion in 2012

And finally one last pick for July 5th:

Weight Watchers (WTW) $51.56, PT $62, SL $48

After an overindulgence of hotdogs and beer July 5th is one of the most popular days of the year to start dieting again. Stock has declined 30% or so recently on anticipation of Arena pharmaceutical's weight loss drug Lorcaserin, which was approved last week. However, we believe its overdone & not a substitute for dieting.

Firms are cutting healthcare costs and boosting productivity by offering workers memberships to health programs like Weight Watchers. (Obesity is the leading cost of healthcare, and considered the "new smoking" when it comes to health concerns).

  • Generated $292 million in free cash flow past year
  • Repurchasing $1.5 billion in stock
  • Over 5 million shorts on the stock — see a nice squeeze ( no pun intended)

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