Cheers to a Good Investment
Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I like to invest in what I know. I know banking and treasury, I know retail, and I know beer.
Since my college days I've seen a dramatic shift in the drinking habits of those around me. No longer is it the weird west coast hippie drinking some beer from a company I've never heard of. Guys and girls of all ages (over 21) are drinking craft brews instead of the usual Bud / Miller / Coors. My dad has even branched out beyond Bass to try things like Flying Dog and McSorely's.
The recent numbers show that while the sales of the big boys are going down ... the little guys are only beginning to ramp up production.
The biggest and best of the group is of course The Boston Beer Company (NYSE: SAM) also known as Sam Adams. I've been following this company (and it's beer) for years. I invested in it in the $50s, watched it crash after the reports of increased hop prices with the potential to kill sales came out, and then watched it climb ever higher when the drop in sales never materialized. I absolutely view this as a long term Buy for two reasons. First off, they are executing fantastically and it shows in the earnings and in the performance. Unlike Bud / Miller / Coors, they aren't everywhere and don't need to spend billions on advertising leaving plenty of room for organic growth.
On the flip side, Bud / Miller / Coors have billions of dollars and have all been actively trying to get into the craft brewing space. Leinenkugel, Blue Moon, Goose Island and others have all been introduced by the big boys to compete against the craft beers.
In addition to Sam Adams there's the Craft Brew Alliance (NASDAQ: BREW) which is made up of Red Hook, Widmer Brothers and Kona. This is a small company, Sub $250M market cap so it is certainly speculative ... but if you believe in the trend, and in the product, then I feel this is another long term play. Either to continue its growth or to be swallowed up.
Lastly, I like the foriegn beers as well. While not craft, I think American's tastes are broadening and people are trying new things. Diageo (NYSE: DEO) and Fomento Economico Mexicano SAB de CV (NYSE: FMX) both fit this bill. Diageo owns numerous liquor brands including Jose Cuervo, Captain Morgan and Smirnoff; but what I am after is it's holdings of Guinness. It has been performing very well and pays a dividend just shy of 3%. FMX on the other hand, operates in Mexico, has Coca Cola processing, convenience stores and other operations on it's books, but also holds a 20% stake in Heineken. So instead of a pure play on alcohol, you get exposure to the Mexican consumer, which has been quite good as well. It also pays a 1.5% dividend.
Certainly shouldn't base a portfolio on beer ... but if you like it as I do, I'm sure there's room for at least one small position.
Motley Fool newsletter services recommend Diageo plc (ADR), Fomento Economico Mexicano and Boston Beer. The Motley Fool owns shares of Diageo plc (ADR) and Boston Beer. CMartin26 has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.