For many of us, October means Oktoberfest. Cheers!
For investors, that also means checking out some up-and-coming craft beer stocks.
While the craft beer industry is booming, it still has a way to go before many investors are comfortable enough to add its stocks to their portfolios.
For those investors who prefer to do their homework well in advance (and don’t mind learning about some tasty new brews), this report is for you.
Here are three craft beer stock names to know…
If you’re a true craft beer aficionado, forget about Anheuser Busch InBev (BUD) or Diageo (DEO)…
Sure, they’re the big dogs in the beer world, but ask any hipster worth his mustache, and a Budweiser is as uncool as white pumps after Labor Day.
Craft beers are made by local, smaller, and often independent breweries—but not always. In fact, the largest of the craft brewing industry, Sam Adams, has a market cap of $3 billion.
That’s nothing compared to Diageo, which makes alcoholic beverages of all stripes in 180 countries and a market cap of $45.4 billion. Anheuser’s $179 billion market cap is also nothing to scoff at. But considering Sam Adams was started in the 1980s, a $3 billion cap is a great achievement.
Today, investors are looking at the growing craft beer trend, which is brewing up several stocks that, while not exactly grand buys today, many are expecting to grow as craft beer takes off.
The craft beer wave is expected to grow 12 percent annually in the next five years. For January-June 2015, however, the booming industry saw a 16 percent growth rate. This year, brewers made 12.2 million barrels of craft beer, up from 10.6 million barrels in 2014.
Here are three hoptastic stocks to watch.
While they’re not rated as strong buys today, if this burgeoning brew trend continues, these companies’ fortunes are sure to rise…
The Craft Brew Alliance (BREW)
Craft Brew Alliance (BREW) is a power consortium of four breweries that joined forces and went public.
The company is the fifth-largest craft beer brewery, and supports breweries in four states.
CBA brands include many you see in the grocery store, including Red Hook, Widmer Bros. Brewery, Kona Brewing Co. and Omission Beer. The company’s 2014 revenue was up 30 percent from 2010.
According to the CBA’s annual report, the company’s margins are off the charts compared to most manufacturers, with gross margins of more than 30 percent.
That’s like 1970s newspaper stocks.
Though the stock isn’t on tear, the company says it sees its fortune following those of our next brewery…
Boston Beer (SAM)
Boston Beer (SAM) makes Samuel Adams and is the big boy of the craft beer world.
It sells $376 million in beer annually and has nearly 15 percent market share in the craft beer industry.
The company sells an astonishing amount of craft beer, and has branched into both the cider world and the alcoholic tea worlds with its Angry Orchard and Twisted Tea brands. Both markets are expected to grow.
Not to be outdone, Boston Beer is also investing in several other breweries through its brewery incubator, Alchemy & Science.
For the incubator and its other inventions, the company landed at No. 62 on the Forbes Most Innovative Growth Companies list this year.
Analysts say hold the stock for now. We’ll also hold an IPA, especially if it comes from our next brewery…
Big Rock Brewery (BR)
Big Rock Brewery (BR) is Canada’s leading craft beer brewery and makes a variety of beers under many labels.
It, too, has branched out into the hard cider world and produces the Rock Creek Dry Cider.
The stock hasn’t seen big gains and its market cap is just $39.2 million, but it does have one big advantage: a dividend. The company paid a 20-cent dividend in each quarter of 2014. On the flip side, Big Rock posted a $324 million loss for the year.
Sure, the craft beer market has a way to go, but if it keeps growing as expected, some of its stocks could find their way into your portfolio.
To that notion, we’ll raise a pint.
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This post originally appeared in mainstreetinvestor.com.
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