Develops, markets, sells & distributes alternative beverage category natural sodas, fruit juices, energy drinks, fruit juice smoothies & functional drinks, non-carbonated iced teas, lemonades, juice cocktails & children's multi-vitamin juice drinks.
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I added HANS to my CAPS at $32.85 on 2/25/2009 during the recession. I never wrote a pitch because I didn't do that too much when I started, regretfully. I plan on writing them for all of my new entries. But I did want to add my most recent notes on them. I feel they have three potentially great growth drivers.
Finding growth drivers for Hanson at this point is difficult, but innovation has to be included in the options the company has to drive growth. This potential could be enormous or fizzle.
They continue to innovate and introduce new products.
The recent introduction of Monster M3, which is a concentrated Monster Energy drink in a five ounce glass bottle has had a positive response from customers. The Company is shipping 3 new lines of Monster Rehab – Rojo Tea + Energy, Green Tea + Energy, and ProTEAn, a non-carbonated protein drink with 15 grams of protein per can.
They recently showed an ultra-premium, nonalcoholic, brewed energy drink, crafted with a fermented malt base. This drink is expected to be launched in a 16.9 ounce glass bottle.
According to Nielsen for the 13 weeks through September 24, 2011, mass merchandisers, convenient stores, excluding Wal-mart, energy drink category sales increased 15.1% from last year. In the same report, Monster drinks increased sales by 22.4%, Red bull increased 14.8%, Rockstar increased 20.6%, sales of 5-hour increased 18.5%, sales of Amp increased 8.1%, Sales of NOS increased 7.9% and sales of Full Throttle decreased 11.2%. In the past, my notes have not included a time when at least one of the competitors didn’t do better than Hansen. Not so with this report.
So my next growth driver – Crushing the competition, taking market share. Besides innovation, they can by using their iconic Monster drinks grow by smashing the competition.
Today, Hansen has about 30.4% of market share in the energy drink category compared to 31.8% for Red Bull. The Gap with Red Bull is closing. Hansen could grow considerably just by taking market share.
Third potential growth driver – International growth.
There are many data points that I find encouraging here and I will note in future page posts introducing them little by little. For now I just wanted to include the point that sales in Europe grew 89.6% in the third quarter over last year for the same period. Their Western European operations are now profitable. They are not profitable yet in Eastern Europe. I feel their International business is in its early stages. It has great potential if they can expand successfully.
Event: Hansen Natural Corp. will change its stock system from HANS to MNST effective January 9, 2012 – That is tomorrow. New CUSIP number is 611740101
Their PE ratio is 32.37 and its cash flow yield is 3% at a price of $93.86 This stock isn’t cheap, it isn’t as cheap as when it was first recommended. I own them and I have no plan of selling them. They have three growth drivers that are all trending the right way. They have a very strong balance sheet with $726 million in cash and investments and less than $1 million in debt. They aren’t cheap, but their future looks really bright. Companies with strong growth potential seldom sell cheap. If I didn't already own them, I would buy in stages, at better and better value points.
I think people vastly underestimate their International potential. I think they underestimate the potential to take market share from other energy drinks in the U.S. I think they underestimate the positive affect of many new innovative products that just keep getting introduced. When there is great potential for growth and a high valuation, there will be plenty of opportunities not just for price appreciation but exploiting volatility, so keep a close eye on this one.
The one day spike over the KO takeover rumor is interesting too. A $20 rise and fall in one day, shows how much investor interest there is in MNST. I think it also shows that MNST is considered cheap by its investors as they bid up the price on the rumor. There was no offer on the table, yet the price immediately went up $20. Pretty interesting!
The price today is $66.74: PE ratio 43.62
February 24, 2011 4Q:2010 earnings’ highlights:
** Gross revenues were $364.067 million up from $329.603 million
** TTM gross revenues were $1.33 billion or $7.09 per share
** Earnings were $0.26 down from $0.28
** TTM earnings were $1.145 per share
** Diluted share count 186.6 million
** Average net sales price per case $10.24
** Cash $643.68 million: debt $7.603 million
** Cash flow for the year was $216.6 million up from $133.5 million
** Cash flow for the quarter was $53.693 million up from $26.7 million
** TTM cash flow was $216.6 million or $1.16 per share
** Trading range between February 24, 2011 and May 5, 2011 was $26.64 to $33.25: PE ratio range was 23.27 to 29.04: PS ratio range was 3.76 to 4.69: Cash flow yield range was 3.5% to 4.4%
May 5, 2011 1Q:2011 earnings’ highlights:
** Gross sales were $407.593 million up from $270.566 million
** TTM gross sales were $1.47 billion or $7.84 per share
** Earnings were $0.295 up from $0.175
** TTM earnings were $1.27
** Diluted share count was 187.3 million
** Average net sales per case $10.28
** Cash flow for the quarter was $17.297 million down from $66.58 million
** TTM cash flow was $167.317 million or $0.90 per share
** Trading range between May 5, 2011 and August 4, 2011 was $32.05 to $44: PE ratio range was 25.34 to $33.2: PS ratio range was 4.09 to 5.36: Cash flow yield range was 2.1% to 2.8%
August 4, 2011 2Q:2011
** Gross revenues were $527.519 million up from $415.297 million
** TTM gross revenues were $1.58 billion or $8.45 per share
** Earnings were $0.45 up from $0.34
** TTM earnings were $1.37
** Diluted share count 187.21 million
** Average net sales per case $10.44
** Cash $729.617 million: Debt $1.255 million
** Cash flow for six months $111.944 million down from $122.386 million
** TTM cash flow was $206.158 million or $1.10 per share
** Trading range between August 4, 2011 and November 3, 2011 was $34.43 to $48.47: PE ratio range was 25.13 to 35.38: PS Ratio range was 4.08 to 5.74: Cash flow yield range was 2.3% to 3.2%
November 3, 2011 3Q:2011 earnings’ highights:
** Gross revenues were $548.069 million up from $438.585 million
** TTM gross revenues were $1.69 billion or $9.02
** Earnings were $0.44 up from $0.36
** TTM earnings were $1.45
** Diluted share count 186.64 million
** Cash flow for the nine months was $213.426 million up from $162.9 million
** Cash flow for the quarter was $155.186 million up from $40.51 million last year
** Cash $726 million: Debt less than $1 million in debt
** TTM cash flow was $267.13 million or $1.43 per share
** Trading range between November 3, 2011 and February 23, 2012 was $42.27 to $56.60: PE ratio range was 29.15 to $39.03: PS ratio range was 4.69 to 6.28: Cash flow range yield was 2.5% to 3.4%
February 23, 2012 4Q:2011 earnings’ highlights:
** 4Q revenues were $409.957 million up 28.7% from $318.665 million
** Fiscal 2011 Revenues were $1.703 billion up 30.6% from $1.304 billion
** TTM revenues were $1.703 billion or $9.21
** Diluted share count was 184.926 million
** Earnings $0.35 up from $0.26
** Fiscal 2011 earnings were $1.53 up from $1.14
** Cash $794 million: Debt 0
** Cash flow for the year was $308.3 million up from $216.5 million
** TTM cash flow was $308.3 million or $1.67
** Gross margins for the quarter 52.3% up from 51.6%: Operating margins 25.2% up from 25%
** Trading range between February 23, 2012 and the present was $53.25 to $83.96 (KO take over rumors) PE ratio range was 34.8 to 54.88: PS ratio range was 5.78 to 9.12: Cash flow yield range was 1.99% to 3.1%
I consider MNST a super stock in my portfolio. I also own PEP. I added MNST because PEP, like KO, is a very mature company. Soda sales have been declining over the last several years. Sales are being replaced by fruit juices, bottle water, and energy drinks, not to mention ready to drink teas and coffees. Overall beverage sales in the U.S grew about 0.9% while energy drinks sales were up 14.4%. PEP is a workhorse, but long ago, I felt it time to add a younger company in what I felt was a very strong industry – the beverage industry. When I added it, they already had a long track record of success and that is one characteristic I feel is very important for a company for its stock to earn a super stock label.
They have very strong growth drivers or growth hooks that I find attractive. Like restaurant stocks, MNST is in an important industry which isn’t going to dry up if we go into a recession. And MNST is more than just energy drinks. They do make their own sodas, teas, juices and even bottle water. They are helping to revitalize an industry with new additions and philosophies.
I am attracted by their international prospects. Among energy drink makers Red Bull, a privately owned company, is slightly ahead of MNST in the U.S. But MNST is growing faster and is likely to take the number one spot soon. Internationally, Red Bull is by far the number 1 leader in the category. I figure if MNST can catch Red Bull in the U.S, they will as they ramp up their International business take more market share from them overseas too. Their International opportunities are huge if they can do as well against Red Bull, which is found in over twice as many countries as MNST, as they do in the U.S. As they expand into more and more countries, they will endure some growing pains. It is just part of the MNST/Red Bull competition that will likely pattern itself after the over century old competition between Pepsi and Coke. My investment in Hansen isn’t short-term, I am thinking decades.
Energy drinks are still a very small part of the beverage business. Sodas still are the big time leader. Only about 2.5% of the combined soda/energy drink market is energy drinks. But the energy drink category is growing much faster. Barring FDA/court decisions, the energy drink market could become 10% of the total market, perhaps far more. But any FDA/court decision could actually accelerate the market, by making MNST and competitors create healthier energy drinks. If this happens, I think MNST will lead the way in terms of innovation that will produce new products.
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Another fast growing category is bottled water. Dasani grew their bottle water sales by 11.4% in 2011 which far outsold sodas. Hansen has their line of bottle water too. This brings us to another potential growth driver – new products outside the energy drink category. Hansen makes bottle water, sodas, teas, and various juices and these categories are very small parts of their business. But money from energy drink sales could help them create many new products.
Present TTM net income per share is $1.79. The PE based on a present price of $58.69 is 32.79. That doesn’t make it a cheap stock. It is like, many super stocks, trading at a premium to growth. But it is expected to grow for many years perhaps decades. The downside is at least somewhat protected by its attractiveness as a takeover target. Just the rumor that Coke might be buying them sent them up $20 in one day only to fall $20 when Coke denied the rumors. But at the right price, someone will make an offer. I hope that right price never comes and they continue to grow earnings while the PE remains somewhat constant or contracts a little. I own them and expect to own them for many years and perhaps decades into the future.