Belly Up to the Bar and Grab This Beer Stock While It's Cheap

In a fiercely competitive craft brew industry, this independent beer maker is the one stock to own. Here's why it's a smart value play in an overbought broader market.
By John Persinos ,

If you're looking to invest in a recession-resistant company that makes a quality product that people will always crave, you can't do much better than Boston Beer (SAM) - Get Report .

Americans have consistently chugged beer since colonial times, when Founding Father Samuel Adams was agitating against the British. Samuel Adams brand beer, the flagship beverage of Boston Beer, commands tremendous consumer loyalty and is considered the progenitor of the funky "microbrew" labels now beloved by beer snobs everywhere.

As the summer beer-drinking season heats up, we explain why Boston Beer is a value play in an overbought and volatile market. Below, we also pinpoint an ingenious investment method that's immune to economic downturns and market crashes.

Boston Beer is scheduled to report second-quarter earnings on Thursday, July 21. The average analyst estimate is that adjusted earnings per share will come in at $1.95, compared with $2.18 in the same quarter a year ago.

The stock is down 16% year to date, as investors fret about intensifying competition in the beer market. A wave of consolidation among distillers has fed concerns that Boston Beer, which steadfastly remains independent, will fall behind as global behemoths enjoy economies of scale and greater marketing clout.

To be sure, Boston Beer's sales have been shrinking in recent quarters as new small-batch breweries sprout up around the country like mushrooms in the rain. Boston Beer's management lowered its full-year 2016 outlook, in the face of stiff competition from novelty beers.

Boston Beer isn't standing still, however, and the company has beefed up its marketing efforts. With a market cap of $2.15 billion, Boston Beer possesses scale, brand loyalty, brewing expertise and financial wherewithal.

Based in a historic quarter of Boston, the company is the country's largest independent brewer and boasts years of brewing and marketing expertise. When entrepreneur Jim Koch founded the company in 1984, there was no craft beer movement in the country. Now, idiosyncratic beer labels are a craze that global behemoths as well as tiny start-ups are eager to exploit. But many of the thinly capitalized Johnny-come-lately brewers are destined to go belly up, while the giant brewers create ersatz craft beers that many beer connoisseurs disdain.

Boston Beer is now the second-largest U.S.-owned brewer, but its sales only account for about 1% of the domestic beer market. That translates into tremendous room for future growth. As Boston Beer grapples with challenges that will likely prove ephemeral, this is your chance to buy an inherently strong stock at a bargain price.

Boston Beer's trailing 12-month price-to-earnings ratio is 24. That's low compared with the trailing P/Es of major competitors Anheuser-Busch InBev (37.21) and Molson Coors Brewing (44.02). In this frothy broader market, SAM is a refreshing value.

---

Five Years From Now, You'll Probably Wish You'd Grabbed This Opportunity:As we've just explained, Boston Beer is a smart bet now. If you're looking for other growth opportunities, we've found a genius trader who turned $50,000 into $5 million by using his proprietary trading method. For a limited time, he's guaranteeing you $67,548 per year in profitable trades if you follow his simple step-by-step process. Click here now for details.

John Persinos is an editorial manager and investment analyst at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.

Loading ...