|Written by GSCR Staff|
|Tuesday, 17 December 2013 08:05|
A great line from the movie Scrooged, the modern update of Dickens’ A Christmas Carol, from Bill Murray as he observes his younger brother’s Christmas party is “…It looks like a beer commercial.”. From the Clydesdales and Jack Daniels, to high end vodka there is always a huge marketing push from the liquor industry this time of year. It’s hard not to feel like you are missing out unless you have a party.
A great article on the beer market in the U.S. appeared in MarketWatch Monday on the topic of changing consumer tastes in the industry and corresponding stocks.
Clearly competition from micro brews and the choice to drink wine and liquor over beer have been contributors to the downfall of some of the formerly popular beer brands. If you can’t beat ‘em, drunk ‘em and buy ’em.
Constellation Brands Inc. (NYSE – STZ - $70.57) may be out of our preferred price range but looks like it could move higher during its current run. The Company sells wine across various categories, including table wine, sparkling wine, and dessert wine; and spirits under the Robert Mondavi Brands, Clos du Bois, Estancia, Black Box, Arbor Mist, Blackstone, Rex Goliath, Simi, Toasted Head, Mark West, Ravenswood, Franciscan Estate, Ruffino, Wild Horse, Kim Crawford, Mount Veeder, Nobilo, Inniskillin, Jackson-Triggs, SVEDKA Vodka, Black Velvet Canadian Whisky, and Paul Masson Grande Amber Brandy brand names.
The technical analysis is very bullish out to 50 days in the Daily Moving Average metric and the put-call ratio is on the bullish side when reviewing the January and April 2014 strike prices at levels above the current level. STZ is in the midst of a 23% price run over the last three months with an average of nearly 1.5 million shares traded per day. Additionally, the Company is expected to grow by 20% in relation to top line revenue in 2014. An options strategy may be the right way to play this one.
Finally, our big beer winner in the Market Monitor in 2013 has been Craft Brew Alliance, Inc. (NASDAQ – BREW - $15.10), which is up 102% since our highlight in April. The technical analysis has turned bearish to very bearish in the DMA in the short to long term range. Additionally the trailing 12-month P/E is a whopping 215, while the forward 12-month P/E is 55, which is still a high number. Finally BREW may be reaching an inflection point in its accumulation phase, making the shift to a selling phase. The stock peaked at $17.78 the day before Thanksgiving. It is time to take some profits here and skim some off the top.
Have a great day and drink responsibly!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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