Investors may have many concerns today, from rising interest rates, to terrorism and cyber-attacks. But America has been through worse: A Civil War, a Great Depression, two World Wars, 9/11, and the 2008 Recession, just to name a few.
Continue Reading Below
This July 4, let's take a look at three iconic American brands that have been there since the beginning and lived to tell the tale: Jim Beam (now part of Suntory Holdings (NASDAQOTH: STBFY), Lorillard (now part of Reynolds American (NYSE: RAI)), and Colgate-Palmolive (NYSE: CL).
Lorillard, known for its Newport and Old Gold cigarettes, dates back to before the Revolutionary War. In 1760, French immigrant Pierre Abraham Lorillard founded a snuff-grinding factory in a small house in lower Manhattan. Pierre was killed by mercenaries during the British occupation of New York in 1776, after which his sons took over the business. The company's trademark image, a native american smoking a pipe next to a hogshead of tobacco, would soon became world-famous.
The company was later part of a landmark 1911 antitrust case, when the American Tobacco Company (ATC) invested controlling stakes in several smaller tobacco companies, including Lorillard. The US Court of Appeals found the ATC in "restraint of trade," so Lorillard became independent once again, until The Loews Corporation bought the company in 1968.
That wasn't the company's last day in court. In 1998, Lorillard and four large tobacco companies reached a historic multi-billion-dollar Master Settlement Agreement with 46 states. Lorillard was also convicted of racketeering, along with Philip Morris and RJ Reynolds, in 2006.
Continue Reading Below
Lorillard became independent again when Loews divested its tobacco assets in 2008, and was reacquired by competitor Reynolds American in 2014 for $27.4 billion. In January 2017, British American Tobacco, which already owns 42% of Reynolds, offered to buy the rest, valuing all of Reynolds at $86 billion.
In contrast to the trust-busting case of 1911 consolidation has been allowed today due to declines in cigarette consumption. Industry volumes were down 3.1% in the first quarter, with Reynolds' cigarette brands posting similar declines.
Cigarettes are, however, highly profitable, with operating margins of 45%, and Reynolds is investing in growth seeds such as Santa Fe organic tobacco, VUSE VIBE vapor products, and modified risk tobacco products. Some also believe tobacco companies may eventually move into marijuana.
Reynolds currently trades at 28.2 times earnings, with a dividend yield of 3.14%.
Believe it or not, there was a time when Mila Kunis was not the face of Jim Beam. It was originally Johann Bohm (later changed to Jacob Beam), who founded the company in 1795 Kentucky. He built the Old Tub Distillery and began making a corn whiskey called Old Jake Beam Sour Mash.
Jacob's descendants expanded the business over the 19th century until Prohibition, when it was shut down. When Prohibition was repealed in 1933, 69-year-old James "Jim" Beam rebuilt the distillery in a mere 120 days, and Beam was back in business.
Beam was acquired by American Tobacco in 1967, which would later become the Fortune Brands conglomerate. Fortune would split into three companies in 2011, of which Beam was one.
In 2014, Japanese whiskey-maker Suntory Holdings bought Beam for $16 billion, a 25% premium to Beam's stock at the time, creating the world's number three spirits-maker.
According to the Financial Times, however, the transition has not gone smoothly due to the clash of two proud cultures. One particularly large bone of contention is that Suntory has not relisted Beam shares on U.S. exchanges yet, as Suntory executives had promised.
Suntory trades at a high multiple -- 34.9 times earnings -- and pays a dividend of 1.42%.
William Colgate, a devout English Baptist immigrant, opened a starch, soap, and candle factory in New York City in 1806, and continued operating the business until his death in 1857, after which his son took over.
In 1873, Colgate toothpaste was invented and later sold in collapsible tubes starting in 1896. The company merged with the Palmolive-Peet company out of Milwaukee in 1928, creating Colgate-Palmolive, which was listed on the NYSE in 1930.
Colgate is a slow-growing consumer goods company, but has paid a dividend since 1895, and is a true dividend aristocrat, with 54 straight years of increases. The company has also been improving margins, a result of a large restructuring program it launched in 2012. In recent months, there has also been speculation Colgate may be a takeout target for The Kraft-Heinz Company.
10 stocks we like better than Reynolds American
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Reynolds American wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of June 5, 2017