There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

November 4, 2008 - Brown-Forman "B" (BFB-NYSE) engages in the manufacture, bottling, import, export, and marketing of alcoholic beverage brands. The company offers Kentucky bourbon, California sparkling wine, tequila, table wine, liqueurs, vodka, gin, champagnes, ready-to-drink products, spirits and wines, and Tennessee, Canadian, and Kentucky whiskies.

Jack Daniel's may be the most well known drink for adults in the world. This is the company that makes and sells it. Even in bad economic times, some would argue especially in bad economic times, adult beverages sell. This stock is defensive in nature and should continue its steady growth.

Over the last 5 years, earnings improved on an annual average by 13% while revenues gained 8.5% annually, on average. In 2005, earnings were $2.32 a share, then in 2006 were $2.52, moving up to $2.85 in 2007. This year, analysts predict $3.04. There are 5 following the company. Next year, they see $3.24. Not too exciting, granted, but it sure looks a lot better than losses or extreme volatility that so many other stocks are reporting.

52% of sales are in the U.S. Total revenues were $3.28 billion in 2007. This year, analysts forecast $3.48 billion, then $3.67 billion in 2009. During the first quarter (fiscal year ends in April), sales were up 4.5% compared to the same quarter last year, led by perennial favorite Jack Daniel's and Finlandia Vodka. However, there are signs of slowing sales in certain countries such as Germany, Australia and England due to higher taxes on ready to drink beverages, higher input costs and/or general global economic weakness.

There was a one time hit to earnings in the first quarter due to a shortage of agave plants, used in the making of tequila. The company is working on more efficient agriculture practices to avoid a repeat.

Look for marketing costs to increase as the company is starting a campaign to promote Jack Daniels. It should help boost sales in markets where the brand is already performing well and help sales in markets where the brand is lagging. Another brand, Finlandia, is expanding and represents one of Brown-Forman's best growing products, especially in Europe. Casa Herradura, a tequila, is doing well, and BFB is increasing distribution outside of Mexico.

Some numbers: P/E is 16.4 with a forward P/E of 14.26. Price to Sales is 1.76 while Price to Book is 3.91. Operating margin is 25.69% with a Profit margin of 16.59%. Return on Equity is an outstanding 25.78%.
There's $160.2 million in cash. Total debt is $997.4 million putting the total debt to equity ratio at .57. Current ratio is 1.457. There are 150.87 million shares outstanding with a float of 133.72 million. The dividend is $1.09 for a yield of 2.4%. Financial Strength as given by Value Line is
A+.

Brown-Forman is one of those steady-as-she goes stocks. With a low beta (.84), it won't be skyrocketing higher when the market turns, but that also means it won't be diving dramatically if the market continues to slide. With several strong brands, good global distribution, and solid management performance (see Return on Equity), conservative investors should find this stock of interest, especially if they already drink Jack Daniel's.

- Company Web site: www.brown-forman.com

- Ted Allrich