Adami's Analysis: Beer Stocks


Whether it’s a winter seasonal brew or raspberry summer ale, what you drink makes a statement about you. Are brewing stocks just the thing to add a hop to your portfolio?

Although total beer sales only increased 1.7% in 2006, sales of so-called craft beers, surged 12% in the same period. And brewing giants Anheuser-Busch (BUD),SABMiller (SAB) and Molson Coors (TAP) are tapping into this trend by buying specialty breweries or creating their own niche brew.

Miller's new Chill, a beer mixed with salt and lime, grabbed 1% of the beer market in just 5 months, according to Bloomberg. That's the fastest growing product for Miller in a decade.

To be sure, there’s risk to the trade. Ethanol subsidies have thrown a monkey wrench into the farm economy, driving up the costs of all grains as more farmers switch over to corn.

Boston Beer (SAM), maker of Sam Adams, saw its profit and stock price wiped out this year on rising prices for wheat, barley and aluminum. However, other beer companies might be better at managing this risk.

Also, Joe Six Pack is willing to pay a little more for specialty beers so price hikes this year are offset some rising costs.

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What’s the trade?

Guy Adami recommends getting long Budweiser because on a valuation basis he thinks its cheaper than Molson Coors and Boston Beer.

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Trader disclosure: On Nov. 20, 2007 the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (YHOO), (EMC); Najarian Owns (AMTD) Options; (GOOG) Options; (YHOO) Options; Finerman's Firm And Finerman Own (GS), (KFT); Finerman's Firm Owns (SKS), (TSO), (WMT), (LTD), (CROX), Finerman's Firm Owns (MSFT) Options; Finerman's Firm Is Short (SPY), (IWM), (IYR), (IJR), (MDY), (LEN); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts; Finerman's Firm Owns (HD) And (HD) Puts, Finerman Owns (HD); Finerman's Firm Owns S&P 500 Puts; Finerman's Firm Owns Russell 2000 Puts