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Beer Lover on Your List? Give a Gift That Keeps on Giving

By John-Erik Koslosky - Dec 22, 2013 at 9:00AM

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For investors who love beer, it’s a fine time. Compelling investing arguments can be made for at least three brewers right now: Boston Beer, Anheuser-Busch InBev, and Craft Brew Alliance. If you have a beer lover on your Christmas list, consider giving the gift of stock, or at least a recommendation.

Owning stock in a company whose products you love can be a rewarding experience, and not just financially. iPhone fans can take pride in owning shares of Apple. Car buffs can feel good about owning stock in a resurgent Ford. Coffee lovers get some extra perk from owning a piece of Starbucks.

It also gives a stockholder a natural interest in his or her investment, and that goes a long way in understanding the business and industry -- and staying ahead of other investors.

For stock investors who love beer, it's a fine time. Compelling investing arguments can be made for at least three brewers right now: Boston Beer (SAM 0.01%), Anheuser-Busch InBev (BUD 0.39%), and Craft Brew Alliance (BREW). If you have a beer lover on your Christmas list, consider giving the gift of stock, or at least a recommendation. There's a company out there that suits almost every taste, either as a beer drinker or stock investor. And perhaps both.

The fast-growing East Coast craft pioneer
With a new brewery opening in the U.S. nearly every day, the craft beer market is competitive -- make that super-competitive. But Boston Beer, the maker of Sam Adams, has been growing at a healthy clip nonetheless. In the third quarter, it posted surprising revenue growth of 30% over the prior-year period, which crushed analysts' estimates. It's also seeing a return to growth for its flagship Boston Lager, which further speaks to the health of the brand across the U.S.

Boston Beer appeals to a wide swath of craft drinkers. Relative newbies are drawn to Boston Lager and seasonals like Alpine Spring and White Christmas ale. Hardcore beer snobs enjoy its Small Batch beers and Barrel Room Collection, some of which score a 96 of 100 on The brewer also targets non-beer drinkers with its Twisted Tea line of flavored malt beverages, and it now has the most popular brand of ciders in the U.S. with Angry Orchard.

The stock has been on a tear, up 74% over the past 12 months. But with the growth it's been generating, Boston Beer doesn't look overly frothy at 45 times earnings.

A craft brewer rises in the West
If investors are expecting growth from Boston Beer, they're expecting Craft Brew Alliance to erupt. Management has high hopes, saying that the company is out of its developmental phase and into its growth phase. Shipments of its Kona brand grew by more than 25% last quarter over the prior-year period, and its Redhook label grew by 20%. Impressive, indeed. Craft Brew sees these two brands stealing away what it calls the "crossover" drinker from the big American labels and imports like Heineken.

One dim spot for the company has been its Widmer Brothers brand, which had seen shrinking shipments for some time. Not good in a craft-beer industry growing by nearly 15% per year. But company officials feel like they have righted that ship, and the Portland-based Widmer brand held steady last quarter from the prior year. The company is retooling its Widmer offerings to rely less on a poor-performing hefeweizen, and company officials think they can give the brand an identity as a high-end craft beer maker. Widmer's 30th anniversary in 2014 provides a good launching pad.

Craft Brew is not for the faint-hearted investor. At 162 times earnings, there could well be some serious volatility ahead as growth ramps up.

The king of all brewers
A discussion about beer stocks couldn't be complete without mention of the King. More than 1 of every 5 beers poured across the globe is an Anheuser-Busch InBev brew. It's huge. For that reason alone, it turns off a lot of beer drinkers who prefer craft-style beer made in small batches from more adventurous recipes.

But A-B InBev is a well-run company. It knows how to get the most profit out of every pint of beer it produces. It also has a voracious appetite. Consider the brands it has gobbled up over the years: Budweiser, Stella Artois, Beck's, Bass, Hoegaarden, Leffe, and Corona, just to name a handful. It's extending the reach of those brands in markets like China, where beer sales grew 30% between 2007 and 2011.  

That won't be the end of its acquisitions. As long as A-B InBev can continue to create efficiencies in its operations as it expands, it will continue to reward investors.

A-B InBev is also not absent from the craft scene. It produces Shock Top wheat ales that compete with lighter craft fare, and it owns Chicago's Goose Island brewery, whose beers it's taken nationally. Its next acquisition could well be another craft brewer.

The Foolish bottom line
If you have a beer lover on your list -- or if you're one yourself -- consider an investment in one of these three companies.  Depending on your tastes, you have an option that likely suits you and can deliver profit and growth for years to come.

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Stocks Mentioned

Anheuser-Busch InBev SA/NV Stock Quote
Anheuser-Busch InBev SA/NV
$54.27 (0.39%) $0.21
The Boston Beer Company, Inc. Stock Quote
The Boston Beer Company, Inc.
$329.21 (0.01%) $0.04
Craft Brew Alliance, Inc. Stock Quote
Craft Brew Alliance, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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