A Toast to Sam Adams
During times like these, especially after the Dow drops another 281 points, investors have to play defense. For Cramer, that means food and beverage stocks.
Enter Boston Beer Co., maker of Sam Adams.
“A brewer is the kind of stock that will thrive in good times and bad…no matter what the credit market does,” Cramer said.
Actually, stocks like SAM tend to do better in weakness, he said, because investors flee to the safety of companies that can deliver consistent earnings. In a market like this one, SAM’s consistent 13% long-term growth rate becomes a lot more valuable to the Street.
SAM also has a terrific upside catalyst. Instead of paying $200 million – a huge sum for a company with a market cap of $616 million – to build a new brewery, the company instead is buying one from Diageo for $55 million.
For almost a year, Wall Street has been watching from the sidelines to see just how much SAM would spend to build a brewery, which the company needs to grow. Now the worry about spending too much is gone.
There are two reasons Cramer thinks this stock will move. Goldman Sachs and Deutsche Bank both have holds on the stock precisely because they were worried about the construction costs. Upgrades should be coming soon.
The other reason is that big institutions don’t like to buy all at once. According to Cramer, they have too much capital to put to work to buy all at once without causing a huge spike. So they’ll take it slowly and take the stock up.
Home Gamers might want to get on board for the ride.
Jim’s charitable trust owns Goldman Sachs
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