What's Your Beverage?

There was another one of those throw-away lines during Kraft's (KFT) earnings call the other day. KFT said that its beverage business was improving, growing 1.5% during the period. Clearly, KFT is not a big player in the beverage business. However, it was a sign.

The beverage business is very much economically dependent. Pepsi's (PEP) beverage business was in the doldrums, but began to pick up in the second quarter. That is when I put my money into PEP. Dr. Pepper Snapple (SNP) reported a solid rise in total profits, beating estimates by 5 cents, with revenues pretty much in line. However, the company did guide a little bit lower due to the loss of its distribution agreement with Hansen Natural (HANS). Still, DPS will grow earnings both in 2009 and 2010, and that is what I prefer to focus on.

In the beer category, Molson Coors (TAP) reported its results this week. The company reported a better-than-expected quarter, but the stock got dragged down by declining volumes. TAP took Boston Beer (SAM) down along for the ride. SAM will report its quarter after today's close. I think that SAM will report an increase in volume, dollar sales and earnings. SAM is expected to earn 39 cents versus 14 cents a year ago. As I pointed out to my newsletter subscribers, the handcrafted beer market continues to take market share and I believe that SAM is just in the right spot.

Here are some important metrics to note from the Brewers Association:

Craft brewers sold an estimated 4.2 million barrels of beer in the first half of 2009, up from 4 million barrels in the first half of 2008.

Overall US beer sales are down 1.3% in the first 6 months of 2009.

Imported beer sales are down 9.5% in the first 6 months.

I have been steadily buying SAM and have added on the recent market pullback. For those of you who can see beyond tonight's dinner, you might want to look at SAM.

Finally, to Joe Girardi, the Core Four and the rest of the 2009 Yankees -- I raise my glass of brew in a salute to you. Gambatte Matsui-san. Once again, the spirit of the Yankees lifted a town beaten down by economic malaise.

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At the time of publication, Rothbort was long SAM, although positions can change at any time.

Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com.

Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities.

Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University.

For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email.