The gourmet beer industry is in a quandary these days that will impact the value of industry stocks, such as Boston Beer (NYSE: SAM), Anheuser-Busch InBev (NYSE: BUD), and MolsonCoors (NYSE: TAP), among others. We think Boston Beer, maker of Sam Adams, is in the best position to thrive.
First, let’s wipe the foam way and study a problem for the industry that’s in significant need of a solution.
The brewery industry has unleashed an army of lobbyists upon Washington, DC, to curry favor, twist some arms (and yes, bend some elbows) to convince Congress to reduce tax burdens micro-brewers consider heavy and onerous. These taxes are a bottom line killer in a combative industry.
Companies such as Boston Beer and Anheuser Busch may have a point on high excise taxes. No longer are North America and Europe no-brainers for beer companies. Growth has stagnated in the so-called “old continents” and breweries are looking to new, emerging market opportunities such as China, India, and increasingly, Africa.
But the entire industry has the dry heaves over a declining market, with older Baby Boomers giving up their wicked ways and their Millennial kids opting for that raspberry cake martini over a nice pint of lager.
That’s where the lobbying campaign comes in, with 2012 a banner year for micro-brewery lobbying efforts, and 2013 should follow suit. In fact, lobbying ranks were significantly swelled as the big micro-brewers put the full-court press on Congress to alleviate what industry executives view as exorbitantly higher excise taxes.
This summer, the US Brewers Association launched a huge lobbying effort that targeted 90 US Senators and 250 members of the House of Representatives, with face-to-face meetings on tap with 250 brewery executives.
Under particular lobbying pressure is House Ways and Means Committee Chairman Dave Camp, a Michigan Republican. The brewery group has already met wi! th Camp and is using that meeting as a jumping off point for those meetings with 340 federal legislators.
And last spring, brewery execs descended on Washington, DC in what the Brewers Association called the largest lobbying effort it’s ever organized. According to the group, 220+ individuals from 46 states met with more than 300 congressional offices. The meetings centered around educating members of Congress about small brewery businesses and asking for support of the recently introduced excise tax recalibration legislation, also known as HR 494, a new bill introduced by Cong. Jim Gerlach, a Pennsylvania Republican.
According to the bill’s official text, HR 494 seeks to “amend the Internal Revenue Code of 1986 to provide a reduced rate of excise tax on beer produced domestically by certain qualifying producers.” The Brewers Association is taking the fight right into bars in the districts of powerful legislators.
After a meeting at a Baltimore ale house, US Sen. Barbara A. Mikulski (D-MD) announced she had joined the Senate Small Brewers Caucus. According to the Senator’s office, at the meeting, Senator Mikulski discussed her commitment to small business jobs and Maryland’s craft and micro breweries that strengthen our economy.?
“Maryland’s small businesses are the backbone of our economy. They create jobs. And they are important to the communities they serve,” Mikulski said. “My great-grandparents owned a local bakery and my father ran a grocery store. I learned how small businesses help weave social fabric by hiring local workers and investing in their communities. I’m proud to raise a glass here in Baltimore with Maryland brewers and take the fight to Washington to support small business jobs.”?
But I don’t like the bill’s chances of passage, and I don’t see any favorable upward movement in brewery stocks as a result. According to the government watchdog site GovTrack.us, HR 4! 94 only h! as a 2 percent chance of passing into law, and is already currently buried in committee as you read this paragraph.
Another industry trade group, the Beer Institute is also looking for favorable treatment on Capitol Hill, pushing a bill that would reduce taxes on all US brewers, no matter what their size. That bill, the Brewer’s Employment and Excise Relief Act (or BEER Act) is set to be introduced later in 2013, after the Beer Institute completes an intense lobbying effort of its own.
The variances are understandable. The Brewers Association represents 1,799 microbrewery companies, while the Beer Institute is home to 2,800 US brewers of all shapes and sizes. Each is representing the interests of its members, and both spent about $1.3 million last year pushing for its interests in Washington, DC. In addition, both groups say the tax issue is their largest priority.
But even if both industry groups break through, and pass one or both bills (and again, I am doubtful either will happen), I wouldn’t get too attached to any beer stocks, save for high-growth microbrew company Boston Beer, maker of Sam Adams.
Betting on Boston
I’m more optimistic about a microbrew firm such as Boston Beer, which announced plans to expand its operations this year.
Industry consolidation has stalled the growth of mainstream beer stocks (such as Anheuser-Busch, which is trading at $99 per share, a level that hasn’t changed much in the past six months). While they are starting to pull back on high prices, after months of driving beer prices upward, the damage has been done. Those higher prices only alienated their core demographic of younger, less affluent drinkers.
As for Boston Beer, the stock is trading at a sky-high $240 per share, worth about $3 billion in market capitalization, after a huge run-up in 2013. Is there enough suds in the glass to keep the company’s stock moving higher?
I think so. Its robust cash position, widely praised distri! bution op! erations, and a strong embrace by so-called “gourmet drinkers” and small brewers all signal a stock that has upward momentum left.
With sales growing by 15 percent to 20 percent annually, and plenty of room to grow (it only controls 1 percent of the US beer market), Boston Beer enjoys better prospects than its industry peers.
The Red Sox are in the playoffs and the Patriots are rolling again, so Boston Beer is set to benefit as the beer of choice in New England this fall—and the stock of choice for consumer beverage-minded investors across the rest of the country.
Brian O’Connell is an investment analyst at Investing Daily. He has appeared as an expert financial commentator on CNN, NPR, Fox News, Bloomberg, CNBC, C-Span, CBS Radio, and many other media broadcast outlets.
Top 5 China Stocks To Buy Right Now: China Lodging Group Limited (HTHT)
China Lodging Group, Limited, together with its subsidiaries, develops, operates, and manages a chain of hotels in the People?s Republic of China. It operates HanTing Express Hotel that targets knowledge workers and value-conscious travelers; HanTing Seasons Hotel, which targets mid-level corporate managers and owners of small and medium enterprises; and HanTing Hi Inn for budget-constrained travelers. As of March 31, 2011, the company had 473 hotels consisting of 259 leased-and-operated hotels and 214 franchised-and-managed hotels; and 162 hotels under development, including 74 leased-and-operated hotels and 88 franchised-and-managed hotels. China Lodging Group, Limited was incorporated in 2007 and is headquartered in Shanghai, the People?s Republic of China.
Top 5 China Stocks To Buy Right Now: General Steel Holdings Inc. (GSI)
General Steel Holdings, Inc., through its subsidiaries, engages in the manufacture and sale of steel products in the People's Republic of China. It offers hot-rolled carbon and silicon steel sheets primarily for use in the production of small agricultural vehicles and other specialty markets; spiral-weld pipes for the energy sector primarily to transport oil and steam; and high-speed wire and reinforced bar products for the construction industry. The company sells its products primarily to distributors. General Steel Holdings, Inc. was founded in 1988 and is headquartered in Beijing, the People?s Republic of China.
Top 5 Small Cap Stocks To Buy For 2014: Top Image Systems Ltd.(TISA)
Top Image Systems Ltd. provides enterprise solutions for managing and validating content entering organizations from various sources. It develops and markets automated data capture solutions for managing and validating content gathered from customers, trading partners, and employees. The company?s solutions deliver digital content to the applications that drive an enterprise by using technologies, such as wireless communications, servers, form processing, and information recognition systems. It offers eFLOW Unified Content Platform that provides the common architectural infrastructure for its solutions. The company also provides Smart, an automated classification solution, which is the eFLOW plug-in for unstructured content providing single point of entry for information entering the organization; and Freedom, the eFLOW plug-in for semi-structured content that enables customers to identify and capture critical data from semi-structured documents, such as invoices, purchase orders, shipping notes, and checks. In addition, it offers Integra, the eFLOW plug-in for structured content, which provides a solution for data capture, validation, and delivery from structured predefined forms; eFLOW Ability, an integrated module interfacing with SAP systems for automated parking, approval, and posting of invoices and other document within SAP systems; and eFLOW Invoice Reader, an invoice capture and approval solution, which could be deployed and integrated in enterprise accounting environment, such as SAP, Oracle, and other financial systems. Top Image Systems Ltd. sells its products through a network of value-added distributors, systems integrators, original equipment manufacturers, and partners in approximately 40 countries worldwide. It has strategic partnership with SQN Banking Systems (SQN) to incorporate SQN's fraud detection solutions with its eFLOW Banking Platform in the Asia Pacific market. The company was founded in 1991 and is headquartered i n Ramat Gan, Israel.
Top 5 China Stocks To Buy Right Now: Arotech Corporation(ARTX)
Arotech Corporation, together with its subsidiaries, provides defense and security products. It operates in three divisions: Training and Simulation, Battery and Power Systems, and Armor. The Training and Simulation division develops, manufactures, and markets multimedia and interactive digital solutions for use-of-force training and driving training of military, law enforcement, security, and other personnel; provides simulators, systems engineering, and software products to the United States military, government, and private industry; and offers specialized use of force training for police, security personnel, and the military. The Battery and Power Systems division manufactures and sells lithium and zinc-air batteries for defense and security products and other military applications; and develops and sells rechargeable and primary lithium batteries and smart chargers to the military and to private defense industry. This division also develops, manufactures, and markets primary zinc-air batteries, rechargeable batteries, and battery chargers for the military; and produces water-activated lifejacket lights for commercial aviation and marine applications. The Armor Division manufactures military and paramilitary armored vehicles, and employs sophisticated lightweight materials to produce aviation armor; and uses engineering concepts to produce combat armored military vehicles and up-armor civilian commercial vehicles. This division also uses lightweight armoring materials and advanced engineering processes to provide ballistic armor kits for rotary and fixed wing aircraft. Arotech sells its products primarily in the United States, Israel, Taiwan, Canada, England, Germany, Australia, China, Hong Kong, Mexico, India, Spain, Singapore, and Japan. The company was formerly known as Electric Fuel Corporation and changed its name to Arotech Corporation in September 2003. Arotech Corporation was founded in 1990 and is based in Ann Arbor, Michigan.
Advisors' Opinion:- [By Bryan Murphy]
For those traders who were lucky and smart enough to be in an Arotech Corporation (NASDAQ:ARTX) before today, then congratulations - you're up at least 38% on your position. Now it's time to get out. Conversely, if you're looking for a new name to get into (or perhaps looking for a place to park your ARTX proceeds), then you may want to consider Pazoo Inc. (OTCBB:PZOO)... a tiny online retailer of health and fitness goods. PZOO has dropped several tell-tale hints that more upside is on the way.
Top 5 China Stocks To Buy Right Now: Yanzhou Coal Mining Company Limited(YZC)
Yanzhou Coal Mining Company Limited engages in the underground mining, preparation, and sale of coal. It involves in manufacturing, washing, processing, and selling steam coal used in the electricity power sector; and metallurgical coal used with coking coal in the process of pulverized coal injection, as well as operates six coal mines. The company also engages in the provision of railway transportation services; production and sale of coal chemicals, primarily methanol; and generation of electricity and heat. In addition, it involves in the manufacture and sale of mining machinery and engine products; and development of integrated coal technology. Further, the company engages in the transportation via rivers and lakes; sale of construction materials; and trading and processing of mining machinery. It has operations primarily in China, Japan, South Korea, and Australia. The company was founded in 1973 and is based in Zoucheng, the People's Republic of China. Yanzhou Coal Mining Company Limited is a subsidiary of Yankuang Group Corporation Limited.
Advisors' Opinion:- [By Roberto Pedone]
Yanzhou Coal Mining (YZC) engages in the underground coal mining, as well as preparation, processing, sale and railway transportation of coal. This stock closed up 7.6% to $7.31 in Thursday's trading session.
Thursday's Range: $7.14-$7.31
52-Week Range: $6.68-$18.57
Thursday's Volume: 391,000
Three-Month Average Volume: 370,383From a technical perspective, YZC bounced sharply higher here right off some near-term support at $6.77 with above-average volume. This stock has been downtrending badly for the last six months, with shares plunging from its high of over $14 to its recent low of $6.68. During that move, shares of YZC have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of YZC have recently formed a double bottom chart pattern at $6.68 to $6.77. This stock now looks ready to reverse that downtrend and possibly trigger a near-term breakout trade. That trade will hit if YZC manages to take out some near-term overhead resistance levels at $7.76 to $8 with high volume.
Traders should now look for long-biased trades in YZC as long as it's trending above its recent low of $6.77 and then once it sustains a move or close above those breakout levels with volume that hits near or above 370,383 shares. If that breakout triggers soon, then YZC will set up to re-test or possibly take out its next major overhead resistance levels at $9 to $10. Any high-volume move above those levels will then give YZC a chance to tag its next major overhead resistance levels at $10.67 to $11.11.
No comments:
Post a Comment