Why Did Bill Gates Buy Heineken Stock?

It hasn’t been a banner year for beer stocks. Molson Coors is the exception, but that company’s over 25% year-to-date increase was largely due to the controversy around its competitor, Anheuser-Busch. The Bud Light controversy and ensuing boycott caused many beer drinkers to flee the brand, though Anheuser-Busch stock did recover in the latter part of the year.

Heineken (OTCMKTS: HEINY) didn’t get the same boost from the Bud Light exodus. The stock did go up on news earlier in the year that Bill Gates invested nearly $1 billion into Heineken stock. The transaction took place in mid-February, and over the next few months, HEINY went up 16% to around $58 per share.

Unfortunately, the gains were short-lived. Concerns about inflation and declining beer demand drove the stock down below $43 per share in October, though Heineken shares have been on a gradual rise since then. Now trading at around $47 per share, HEINY has only delivered a 0.28% year-to-date gain.

So then why did Bill Gates invest so much in Heineken stock?

Why Did Heineken Stock Go Down?

There have been consistent red flags in the beer industry, and they have concerned investors. Beer sales are declining and it’s not just due to inflation. The number of beverage consumers have stayed similar, but they are just moving away from beer to other options.

Whether that’s due to health reasons, flavor or calories is yet to be seen. The decline has certainly affected Heineken, because the company saw its stock drop after reporting that beer sales were down 5.6% over the first half of 2023. It’s a problem that’s persisted into the 3rd quarter, as the company reported beer volume organic growth was down 4.2%

Heineken still grew revenue by 2% year-over-year in the quarter. That was largely due to the company’s increasing sales in the Americas and Europe. Elsewhere in the world, the company saw a sales drop. The Heineken beer brand was the main revenue driver, delivering 2.3% more than last year.

Will Heineken Stock Go Back Up?

That brand includes Heineken Silver and Heineken 0.0, and both brands aim to take advantage of changing customer preferences.

Heineken Silver is the company’s light beer entry, with lower calories, carbs, and alcohol content than the original version. Heineken 0.0 is a non-alcoholic beer aimed at those who want to cut back or eliminate alcohol consumption.

Whether the company’s line of products can turn things around is still up for debate. Heineken 0.0 saw a 3.5% increase in sales in the 3rd quarter, largely driven by the Americas. Heineken Silver was just released, to much fanfare, in early 2023. While Asian revenue from the beer grew by over 40% in the quarter, the jury’s still out on American adoption of the new product.

It’s still out on the future of the beer industry, as well, as there are far more options for alcohol drinkers than ever. While Heineken is certainly positioned to stay in contention, that’s no rousing endorsement for potential investors.

What Do The Analysts Say About Heineken Stock?

It may come as a surprise then that market analysts are still in Heineken’s corner. Out of 23 analysts who have weighed in on HEINY, 15 still rate the stock is a buy at $47. The median forecast has the stock topping $55 per share over the next year, which would be a 18% increase.

Five of those bulls forecast that Heineken shares are set to outperform the market, with the highest estimate predicting that HEINY will hit $64.07 per share in the next 12 months. That would be a 36% increase from present levels.

7 of the 23 have the stock as a Hold right now, and there is a lone Sell rating on HEINY. The lowest forecast has the stock dropping by nearly 20% to $37.68 per share.

Why Did Bill Gates Buy Heineken?

Most likely, Bill Gates bought Heineken for its 1.8% dividend yield and because its 18% undervalued according to analysts consensus estimate.

With that said, the billionaire hasn’t given any reasoning as to why he bought such a large amount. After all, he’s gone on record saying he’s not a beer enthusiast, and mainly drinks lighter beers on social occasions.

The company’s current P/E ratio is 19.61 raises concerns that the stock is overvalued. Heineken does pay a dividend, though, and the annual dividend yield amounts to a $0.26 per share quarterly payout. While that adds up when you own 10.8 million shares, as Gates does, there are better dividend stocks out there.

Is Heineken Stock a Buy?

While there’s no way to know for sure why Mr. Gates liked the stock so much, there could be another reason. The beer industry is in a downturn, and craft beers in particular are facing declining sales due to higher costs and higher calories. Also, the number of breweries has skyrocketed over the past few years.

Add to that the popularity of seltzers and other lighter drinks, and it’s easy to see why beer is struggling. Bill Gates might be betting that Heineken’s established brand and new products will see the company through while other breweries struggle or close up shop.

While that’s just speculation at this point, it’s also worthwhile to note that 10.8 million shares, a $939 million investment, is not a substantial investment for one of the richest men in the world. Heineken may not offer growth, but it offers stability and a dividend, and that might be enough for Bill Gates.

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