Don't Bet Against These High Yielding Food & Beverage Giants

SA contributor Paul Franke presented an article Friday that has generated a lot of discussion. In Short Selling Ideas For July: Ugly Blue-Chip Balance Sheets, Franke identifies four companies that he views as significantly overvalued and worth selling short. These four companies are General Electric (GE), Charter Communications (CHTR), Anheuser-Busch InBev (BUD), and Kraft Heinz (KHC).
I'll refrain from comment on the first two, since they're outside the scope of this article. However, I own Kraft Heinz stock, and I view Anheuser-Busch as reasonably attractive here as well. So, let me offer an alternative perspective on Franke's objections to these companies' stocks.
Let's Talk About Tangible Book Value A major premise of Franke's point of view is that companies have levered up too much in recent years, as compared to past times. This leaves the companies with little in the way of firm assets in a liquidation scenario. He explains it as follows:
Very few companies have serious tangible book values (hard asset liquidation value) when measured against near-record stock pricing. I remember in the mid-1980s, when I began my investment career, a blue-chip equity trading above 5x tangible book value was quite rare. In fact, in the early 1980s, the S&P 500 average traded close to its net tangible assets. Fast forward 30+ years to 2018, where the sort group I monitor is closer to 10x tangible book value! In addition, the average corporation is carrying... Read more