3 Beer Stocks to Draft in 2014

(image courtesy Perry, via Flickr)

These days hops are popping -- Americans love their suds, and they especially love Anheuser-Busch InBev SA  (NYSE: BUD  ) , Craft Brew Alliance  (NASDAQ: BREW  ) , and Boston Beer  (NYSE: SAM  ) .

It's good to be the king
For many, Anheuser-Busch InBev SA is, and will always be, the King of Beers. However, this is not your father's Budweiser. Though many still associate Bud with St. Louis, Anheuser-Busch InBev is headquartered in Belgium and controlled by Brazilian management. But while Anheuser-Busch InBev has changed ownership and corporate headquarters, it's just as profitable as ever. 

The company's rich margins (over 50% gross and 18% net) left it largely unscathed during the Great Recession. With the Busch family gone, Anheuser-Busch InBev has set its sights on the world market to continue its growth. For instance, Anheuser-Busch InBev recently purchased South Korea's Oriental Brewery Co for $5.8 billion. Actually, technically, Anheuser-Busch InBev repurchased Oriental Brewery; it sold the South Korean brewery to the private-equity firm Kohlberg Kravis Roberts right after InBev merged with Anheuser Busch in the summer of 2009. This M&A transaction gives Anheuser-Busch InBev 60% of the beer market in South Korea and an entry point for Asian growth. Anheuser-Busch InBev is as safe as any stock in this sector -- shares were up 4% YTD. This is a stock that pays -- it has a dividend yield of $3.14. I also like the stock's "pitch-perfect" P/E of 11.55. If you can afford this stock you should buy it. 

Sam i am
If Anheuser-Busch InBev is the King of Beers then Boston Beer is the 800-pound gorilla snarling at the king and daring him to get up from his throne. Boston Beer Company brews some great American brands -- the Angry Orchard and HardCore hard cider beverages, the popular Twisted Tea, and the flagship Samuel Adams. Boston Beer is growing rapidly and sold 2.7 million barrels of beer in 2012.

Boston Beer has continued to dazzle. Revenue increased 29% in 2012, while during the same period shipments increased by 29%, sending the stock up 77.83% for the year. This stock is a dynamo, and with only 950 employees Boston Beer has a healthy market cap of 2.8 billion and lots of momentum. The company has wisely invested to keep its edge -- Boston Beer invested $140 million to improve its breweries -- which primes the pump for more growth. Boston Beer even has a beer R&D operation, the Alchemy & Science division, which concocts new suds and searches for potential breweries to buy. One of the Alchemy & Science division's targets will soon become an official M&A transaction that Boston Beer thinks will help its brand and grow profits. Coney Island Brewery will be part of the Samuel Adams brand, which will help Boston Beer maintain its craft beer edge while expanding its offerings.

The craft masters
Craft & micro-brewers are scorching hot these days, and Craft Brew Alliance epitomizes this micro-brew trend. Craft Brew Alliance has breweries on the east and west coasts and it's poised to grow at 20% over the next five years. This small company has quite a few popular brands that consumers love. Both Redhook Ale and Kona Brewing Company have strong followings, so much so that Craft Brew Alliance has doubled its share price in one year.

As American beer drinkers move away from the larger beer brands, Craft Brew Alliance and other craft brands will continue to grow their American market share as their beer brands become the new household names and firms like Anheuser-Busch InBev look to Asia. In 2013 Craft Brew Alliance was the little stock that could--shares were up a whopping 156.38% over the year, rising from $6.62 to $17.28 per share. The P/E ratio of 234.69 is an issue, however, so think before you buy. Overall, though, this stock is well worth watching in 2014.

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Related Tickers

9/3/2015 3:59 PM
BREW $7.71 Down -0.04 -0.52%
Craft Brew Allianc… CAPS Rating: ****
BUD $107.84 Down -0.42 -0.39%
Anheuser-Busch InB… CAPS Rating: ****
SAM $208.01 Up +6.51 +3.23%
Boston Beer CAPS Rating: ****