Heineken – Looking Past The Pandemic

Heineken N.V. (OTCQX:HEINY) is among the world’s largest and strongest consumer staple businesses which was also one of the worst hit by the pandemic closures.

I first covered my investment thesis for the company back in April of last year when I wrote Heineken – A Business You Can Retire With‘. The premise for taking a long position in the company is relatively straightforward, but it also requires lots of patience, discipline and a fairly long-term investment horizon.

To begin with, Heineken has two major competitive advantages that put a very wide moat around its business. Firstly, its iconic brands create an almost impossible to replicate competitive advantage in a very stable industry where brand loyalty plays a major role in purchasing decisions. Secondly, the company’s large size and global reach also play a crucial role in sustaining above average return on capital.

Such businesses rarely trade at a discount and are characterized with a steady accumulation of wealth over time. The pandemic, however, created a rare opportunity to buy this business at much lower multiples due to the temporary headwinds from on-trade channels.

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