Recently, Fool co-founder David Gardner laid out his plans for investing accountability in a three-part series entitled "Moneyballing the Financial World." He saw a financial landscape littered with numerous bullish or bearish calls about certain stocks with no accountability afterwards. As a contributor for The Motley Fool, I try to hold myself accountable as well and have backed up many of my calls on my CAPS page with articles.
In reviewing some of my "calls" recently, I realized that I could probably fill in some of the gaps in regard to my own picks. With that in mind, I have decided to examine some of the picks that I have made over the past few months with some of my favorite stocks. Today, I will formalize my bullish CAPScall for Boston Beer (NYSE: SAM), a stock that I used to own and one that is still on My Watchlist. There are three reasons Boston Beer has the coveted green thumb over on CAPS: founder and chairman Jim Koch, the quality of the product it sells, and the recent performance of the stock.
It's pronounced "Cook"
Born into a family of brewers, Koch's passion for quality and full-flavored beer led him to brew an old family recipe and sell it by the bottle to local bars around Boston. The original Sam Adams Boston Lager was well received, and within six weeks it was selected as "The Best Beer in America."
Since that first batch was brewed in 1984, Koch has led the company in accordance with his passion for good beer. He has rejected purchase overtures from larger brewers so he can remain independent to make beer the way that he wants. As the sole owner of the Class B shares, he can keep the company focused on the vision he had when he founded it nearly 30 years ago.
Quality of product
By maintaining his hold on the company and the vision he has had since Day One, Koch is able to keep the products under the Boston Beer umbrella up to his exacting standards. Every batch of Sam Adams beer is hand-crafted using all-natural ingredients. Boston Beer was one of the first brewers to place a "freshness" date on his beers, and it has continued to buy beer back from distributors once it has passed its peak freshness date.
In an industry dominated by large, multinational brewers, Boston Beer is the largest craft brewer in the United States, brewing close to 2 million barrels a year. This accounts for only around 1% of the U.S. beer market. The only other publicly traded craft brewer, the Craft Brewers Alliance (Nasdaq: HOOK), produced closer to 600,000 barrels last year.
The growing craft-beer segment has led larger competitors to sell craft beers of their own. Molson Coors (NYSE: TAP) and SABMiller have teamed up in marketing and selling Blue Moon, one of the most popular Belgian style beers in America. With the launch of Bud Light Platinum, Anheuser-Busch InBev (NYSE: BUD) continues a move into a more "craft-friendly" position, joining previous entries Bud Light Lime and Bud Light Golden Wheat. Even Diageo (NYSE: DEO), the spirits maker known more for products like Johnnie Walker and Captain Morgan, sports craft brews such as Smithwick's and Kilkenny. Nevertheless, Boston Beer has been making craft beers much longer, and its great-tasting product, coupled with a room-to-grow market share, bodes well for the future.
Performance of the stock
Although it accounts for only 1% of the current beer market, its stock has outperformed its larger competitors over the past two years. And that's despite not paying a dividend, something its competitors can use to entice investors to their stocks. Instead of paying a dividend, Boston Beer has reinvested income into purchasing the breweries where its beer is produced, allowing it to control the quantity and quality of the beer produced every year.
|
Company |
2-Year CAGR |
Current Yield |
|---|---|---|
| Boston Beer | 54.1% | N/A |
| Anheuser-Busch InBev | 19.7% | 1.5% |
| Molson Coors Brewing | 6.1% | 2.9% |
| Diageo | 25.4% | 3.4% |
Source: Yahoo! Finance.
The great performance of the stock has been partially driven by increasing revenues, with net revenue increasing more than 76% over the past five years. Furthermore, revenue is expected to exceed $500 million for the first time in company history when annual results are reported in March. In addition, Boston Beer has managed to succeed without racking up debt, giving it flexibility going forward should it have the desire to further expand operations.
The bullish bottom line
Boston Beer remains the leading brewer of craft beers in the United States, with more than 31 varieties of beer. By focusing on delivering the best product to its customers, under the guidance of founder Jim Koch, the Boston brewer has been delivering quality returns for shareholders as well.
Though I don't currently own the stock, I'm backing up my bullish prediction by maintaining a green thumb on Boston Beer over in My CAPS. I hope it'll continue to be one of my better performers.
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