Prepare for America's 'ripping point'; Merger talk between Brown-Forman and Pernod Ricard; Amazon stands to benefit from its stake in Anthropic; Value Investing Seminar in Italy this July
1) I'm concerned that our whole way of life is being swept away in front of our eyes...
Hundreds of thousands of people are losing their jobs. Violent swings are battering the stock market. Entire industries are collapsing around us.
I'm not only worried for older folks like me. I have three beautiful daughters. And it feels like their future gets more unstable with every passing day.
It's not just because of the extreme political division or violent protests that seem to be a regular part of our lives now. I mean the deeper change that we can all feel.
We're living through a permanent reset in our economy. It's making the world – the one our children are going to inherit – deeply unstable.
I'm calling it America's "ripping point." And it has huge implications for everyday investors.
That's why, in a brand-new presentation, I share the ways you can protect your wealth – and profit from the enormous changes underway.
You can watch it – for free – right here.
2) On Tuesday, I highlighted how cheap spirits maker Brown-Forman's (BF-B) stock had become. And I'm not the only one who noticed...
As the Wall Street Journal reported yesterday, French wine and spirits maker Pernod Ricard (RI.PA) is "in talks" to merge with Brown-Forman. The news boosted Brown-Forman's stock by 9.6% yesterday.
On the other hand, Pernod's stock tumbled 5.7% and hit a 15-year low yesterday. But the stock has rebounded as much as 3.6% this morning as investors warmed up to the possible merger.
As this other WSJ article noted, both companies stand to benefit:
The merger, coming at a time when the drinks industry is becalmed, would offer savings for investment to get some momentum into struggling sales...
The companies said that operational synergies would be significant, pointing to Brown-Forman's portfolio of brands – which alongside star label Jack Daniel's includes Diplomatico rum and Chambord raspberry liqueur – and Pernod Ricard's global distribution strength and exposure to emerging markets.
As I pointed out on Tuesday, I think the rise of GLP-1 weight-loss drugs creates a long-term headwind for alcohol consumption worldwide – especially now that Ozempic just went off patent for billions of people.
So I agree that the deal makes sense. It's a sensible strategy that offers consolidation and cost cutting.
I took a first look at these companies in 2024 – Brown-Forman on November 13 and Pernod on November 14.
I concluded that both stocks were trading at rich multiples despite showing almost no growth over the past decade, so I told readers to avoid them – and continued to do so over the past year and a half (archive here and here).
It was a good call, as they're down 36% and 46%, respectively, since my first looks.
But at today's depressed prices, I'm finally intrigued...
Brown-Forman trades at 14.8 times this year's consensus analysts' earnings estimates. Pernod is even lower at 10.6 times.
They both have powerful global brands that drive high net margins – Brown-Forman's is 21%, while Pernod's is 14%.
And they generate gobs of free cash flow ("FCF"), as you can see in the two charts below:
I think their stocks are interesting here, but I would only want to invest if the merger goes through. So I'm going to wait and see if it happens. That will also give me a few more quarters to gauge the impact on these businesses of Ozempic becoming more widely available.
At that point, if my Stansberry's Investment Advisory team and I decide it's time to invest, subscribers will be the first to know. (If you're not already subscribed, you can do so by clicking here.)
3) AI company Anthropic has been in the news a lot lately...
As this Axios article details, its large language model Claude triggered the "SaaSpocalypse" last month.
And it has been crushing OpenAI's ChatGPT in the business market.
ChatGPT had around 90% market share last February. But as this chart from Ramp Economics Lab shows, just one year later, Anthropic had around 70%:
And yesterday, Anthropic won a big court battle with the Trump administration over military use of AI, as the WSJ reported.
Lastly, it's making plans to go public later this year, likely at a huge valuation.
The company last raised money at a $380 billion valuation. And the real-money bettors on Polymarket think there's an 89% chance that it will be valued at $500 billion-plus at some point this year, either in another private-funding round or by going public.
What's less well known is that Amazon (AMZN) owns approximately 8% of Anthropic, so its stock might benefit from the AI company's success.
If Anthropic was valued at $600 billion, Amazon's stake would be worth $48 billion. That's only 2.2% of Amazon's current market cap of $2.2 trillion, but it's nice icing on the cake.
The main reason why Amazon remains my favorite large-cap tech stock is that it's only trading at around 26 times this year's consensus analysts' earnings estimates. That's much too low for one of the world's greatest businesses with tremendous growth opportunities ahead of it.
4) My friend Ciccio Azzollini and I will once again be hosting – for the 22nd time! – our Value Investing Seminar on July 9 and July 10 in beautiful Trani, Italy.
Here are some pictures from previous seminars:
We limit the seminar to 60 attendees, who will fly into the nearby Bari Airport. (There's now a nonstop flight from New York City.)
Two dozen of them will share their latest thinking on where to find the best opportunities around the world and outline their current favorite investment ideas.
The seminar is fun, educational, and a great addition to any European vacation. Here's what our friend Guy Spier of Aquamarine Capital kindly posted about it a few years ago:
You can learn more and register to attend right here... I hope to see you there!
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.