COMPANIA CERVECERIAS UNIDAS S.A.

Ticker: CCU, Buy below $22.

CCU is a Chilean producer of diversified beverages. The company produces both alcoholic and non-alcoholic beverages. They have operations in Chile, Argentina, Bolivia, Colombia, Paraguay, Uruguay and Peru.

Why I Would Buy

  1. Contrarian Buy – Dislocation in Chile has led to a double whammy: the stock has crashed; additionally Chilean Peso has crashed against the US Dollar.   
  2. Industry – CCU produces and markets alcoholic and non-alcoholic beverages in multiple Latin American markets. Beverages are generally a recession-resistant, high margin business.
  3. Dividend – 3% yield, payout ratio has stayed below 50% for past 10 years.
  4. Return on Equity: CCU has earned double digit returns on equity  for most of last decade

What Could Go Wrong

  1. Chilean Social Unrest – Severity of Chilean social crisis is unknown. Result of the constitutional rewrite could be severe socialism, and wipe out all private investments.
  2. High Dividend Taxes – Chile extracts very high taxes of 35% on dividends.

Disclosure: I am long CCU, please read additional disclosures here before taking any action based on this post.

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