Article

Investors’ Thirst Growing for Craft Beer Stocks

September 17, 2010

Craft beer is defined as any beer with less than 2 million barrels sold each year. In the overall beer market, it’s a small segment, despite accounting for about $7 billion in annual sales.

The market share might be small, but the opportunity for investing profits is another story.

The two publicly traded companies have seen explosive growth in the last year.

Craft Brewers Alliance [HOOK 6.18 0.14 (+2.32%) ], with brands like Red Hook and Kona Brewing Company, trades on the NASDAQ and traded as low as $2.03 in the last 52-weeks. The stock has quadrupled since then.

The company has reported strong results, and the stock has seen an incredible bounce for two reasons. First, there’s rampant speculation that a major brewer might take it out. And the run-up in valuation has now allowed some mutual funds to pick it up as well.

Then there’s Boston Beer [SAM 101.48 -1.07 (-1.04%) ], which trades on the NYSE. It’s the largest player in craft beers, close to selling so much beer that it will no longer fit the category, which is all brewers below 2-million barrels annually.

Boston Beer has also seen a tremendous rise in stock value, more than doubling from its 52-week low. And a lot of it is based on fundamentals. Revenue growth approached double digits last quarter, and profit growth was 16-percent.

With craft beer growing in the US while overall beer sales are down, the trend is expected to continue. The question is whether that growth is already priced into the stocks.

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