Happy Hour for Heineken Investors

"It takes something new to produce a startling advance in the price of a stock," says William O'Neil in his investing bible, How to Make Money in Stocks.

Besides a new, quick-selling product or service, he says "it can also be a change of management that brings new vigor, new ideas or at least a new broom to sweep everything clean."

Enter Jean-Francois van Boxmeer, who took over the helm of Heineken (HINKY - commentary - Cramer's Take) one year ago.

In doing so, he not only brought out the broom with a 200 million euro cost-cutting program at the Dutch brewer, but also helped to revitalize the U.S. business with the rollout of Heineken Premium Light and to oversee the successful integration of several Russian acquisitions.

As a result, in van Boxmeer, Heineken has one of the key ingredients needed to produce a startling advance. Indeed, the stock has enjoyed a 35% gain in the past year. Even so, I believe there's still more upside.

Part of that is the macro wind filling the company's sails, as consumers worldwide trade up in beer. While the overall global beer market is increasing at an uninspiring 2.7% yearly clip, the more profitable international premium segment -- led by the core Heineken brand -- is seeing 6.4% annual growth.

The rest of the upside is specific to Heineken.

From Russia With Love

First, consider Russia. While vodka undoubtedly its national drink, the country also has one of the world's fastest-growing beer markets, having doubled in size since 1999, according to UBS.

Russia also happens to be Heineken's biggest market by volume, the result of its nine acquisitions over the past two years. With 13 million hectoliters (or more than 343 million gallons) of Heineken beer sold in the country during its last fiscal year, the brewer now owns a 14% share of the Russian beer market and stands as the clear No. 3 player.

But it's not done yet.

In fact, van Boxmeer has called Russia "the cornerstone of future development of Heineken." The company is integrating the Russian acquisitions ahead of plan and aims to boost its share of this beer market to 20% over the next five years or so.

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At time of publication, Norton's fund was long Heineken, InBev, Anheuser-Busch, Kirin, CCU and Femsa, though positions may change at any time.

Charles L. Norton, CFA, is a principal of GNI Capital, Inc., an SEC-registered investment advisor that provides investment management expertise for separately-managed equity, fixed income and ETF portfolios and a hedge fund, and is co-portfolio manager of the Vice Fund (VICEX) and the Generation Wave Growth Fund (GWGFX). In addition, Mr. Norton authors a twice-monthly newsletter, Supernova Stocks, which focuses on investments in market-leading stocks with unique and extraordinary growth potential. Mr. Norton had been a vice president in the equity research department of a New York-based hedge fund, where he also managed separate accounts for high net worth clients. Prior to his experience on the buy side, Mr. Norton worked in the investment banking division of Salomon Smith Barney, where he was an analyst in the health care group, reporting directly to the head of the group. While Mr. Norton cannot provide investment advice or recommendations, he appreciates your feedback; click here to send him an email.