BROWN FORMAN

After several months of watching Brown Forman (BFB) it has now come down to a price I am willing to pay for it. Today I bought BFB at $66.69 per share.

Brown-Forman is best known for producing Jack Daniel's, the world's top-selling brand of whiskey, has fallen out of favor with investors. The stock hit a 52-week low Tuesday, closing at $66.06, or some 20% below its August highs.
The 136-year-old company also owns liquor brands like Southern Comfort and Finlandia vodka, in addition to Fetzer wine and Korbel champagne. The Hartmann luggage business also accounts for about 1.5% of Brown-Forman's total revenue and is reportedly up for sale.
The consensus analyst estimate is for the company to grow earnings 10% in fiscal 2007 to $3.15 a share, marking the fourth straight year of double-digit profit improvement.
The company posted fiscal second-quarter (ended October) results Nov. 30. Brown-Forman earned 92 cents a share, up 5% from the previous year, but 4 cents shy of analyst estimates. This shortfall came even though management produced 10% year-over-year revenue growth during the quarter, to $735 million.
The reason for the shortfall: The company reported soft overseas sales of its Jack Daniels brand, especially in the U.K., China and Spain. But despite fears of increased foreign competition, I believe that Brown-Forman will benefit from a weaker U.S. dollar. In fiscal 2006, 41% of the company's revenue was generated overseas.
Because of this, its product will look cheaper in Europe and Asia, and money earned overseas will be worth more when converted back into American dollars. In the U.S., shipment volume missed quarterly targets as wholesalers reportedly worked down inventory.
Brown-Forman also recently increased its bet on tequila, which is seeing the fastest-growing demand of any type of alcohol in the U.S., up 7.8% last year. The company bought Mexican tequila-maker Grupo Industrial Herradura in August for $876 million.
Brown-Forman boosted its quarterly dividend to 30.25 cents a share Nov. 16. Management has now raised its payout 21 consecutive years, and the company's 1.8% yield is on par with what the average stock in the S&P 500 offers.
Despite its operating woes in the most recent quarter, I believe that Brown-Forman is attractive at current levels. The company continues to post solid revenue growth both organically and through acquisitions, and the stock has already come down enough to reflect one disappointing quarter.
Management has pledged its confidence behind the stock with the recent dividend boost, and I believe that Brown-Forman's consistent double-digit earnings growth will get back on track in the coming quarters.