No Froth in This Merry Stock

01/25/2011 11:56 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

The party’s not over for Boston Beer Company even as the brewer of Sam Adams outgrows its craft-beer origins, writes Ian Wyatt of SmallCapInvestor Daily.

Boston Beer Company (NYSE: SAM) produces the popular Samuel Adams Lager and Twisted Tea, as well as a huge variety of seasonal offerings. The company is headquartered in Boston and has breweries in Massachusetts, Ohio, and Pennsylvania.

While the stock is not likely to double in the next year as it did during 2010, it has been a constant performer, and the recent pullback from $100 to around $90 represents a good opportunity.

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The company has a record of profitability, with analysts expecting 10% revenue growth and 11% earnings per share growth in 2011. During the quarter ended in September, revenue increased 14.5% from the comparable three months of 2009. The company also increased shipments by 13%.

Consumers are becoming increasingly interested in the small-scale craft brewing segment. And they're buying those beers instead of the mass produced offerings.

I began covering the US beer market this past summer after hearing reports of yet another blockbuster year for the Vermont Brewers Festival. With over 30 different breweries from the region participating, the turnout was strong and the beers varied.
I've since noticed the massive amount of shelf-space dedicated to craft and micro brews at my local gas stations, convenience stores and liquor stores. After realizing that I was a huge fan of many of these frothy offerings I began researching growth stock investment opportunities in the craft brewing industry.

Boston Beer is growing fast enough that it may soon outgrow craft beer status. The brewer expects to sell more than 2 million barrels by 2012. But just because the company may outgrow the 'craft brewer' definition doesn't mean it isn't a compelling investment. It may just be in the sweet spot—small enough to gain greater popularity as a top-quality brewer but large enough to gain distribution efficiencies and greater shelf space.

[Wyatt’s November recommendation, the Market Vectors Agribusiness ETF (NYSEArca: MOO), is up 10% in the last two months—Editor.]

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