Under-the-Radar Stock Drives Beverage Industry

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Tim Begany

NEW YORK (StreetAuthority) -- To make money in stocks, some investors prefer to "fly under the radar," holding shares of companies that operate in the background by helping big-name firms do what they do best.

One reason I like these "behind-the scenes" companies is they don't get nearly as much press as such well-known stocks as Microsoft (MSFT), Wal-Mart (WMT) and General Electric (GE), so they may be less prone to price behavior related mainly to investor sentiment and speculation.

One of my favorites provides an essential product -- aluminum cans -- to several top beverage companies including Anheuser-Busch InBev (BUD), Pepsico (PEP) Coca-Cola (KO). It also makes metal food cans, aerosol cans and metal jar tops. In fact, it's the world's largest producer of metal packaging, though I doubt many consumers or investors would know it, probably because most care a lot more about what's in a beverage can than about who made the can.

The company I'm referring to is Crown Holdings (CCK), and if it's not a great behind-the-scenes stock, then I don't know what is.

Crown is an excellent investment because it's a firmly entrenched leader in the metal-packaging oligopoly of North America, Europe and Brazil, where competition is limited to a few other key players such as Ball (BLL) and Silgan Holdings (SLGN). This concentrated market structure allows Crown (and its peers) to charge higher prices because customers can't seek discounts elsewhere. Powerful new competitors are unlikely to appear anytime soon, particularly in the mature North American and European markets, where new manufacturing facilities are costly.

Twenty-eight percent of Crown's $8.5 billion in revenue comes from North America (mainly the United States), 47% comes from Europe and 25% comes from emerging markets. However, these proportions are likely to shift more and more in favor of emerging markets, since demand in those regions is growing fast while North America and Europe are holding steady. Metal packaging, currently a $59.8-billion-a-year industry, is projected to grow to $165.4 billion by 2021, mainly on rising demand in emerging markets.

To grab its share of the growth, Crown is stepping up operations globally, but especially in China, where demand for metal packaging is especially strong. On Oct. 7, for example, the company opened an aluminum can plant in Hangzhou, a city in the Zhejiang Province of Eastern China. The plant, which is expected to have an initial production capacity of 700 million cans per year, is Crown's fifth beverage can plant in China. Existing facilities are located in Bejing, Foshan, Huizhou and Shanghai. Crown now controls 20% of China's metal-packaging market, placing it at the top in Chinese market share along with Ball.

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