Sam Adams Guides Lower, gets Needed Pullback
When stocks collapsed in 2008 on the back of the mortgage disaster, there was a little beer company up in Boston that was about to become the darling of any hedge fund manager.
If you'd stumbled into a local tavern in Boston - and ordered a Sam Adams draft beer to drown your market sorrows it might have occurred to you how good the beer was, but you never, ever would have dreamed that Sam Adams producer Boston Beer Co Inc. (SAM) would go up 500%. Shares in 2009 traded $17 and closed Tuesday night at $310, so if you do the math, the stock price has outperformed nearly every stock in the S&P500 Index.
Sam Adams beer had a pullback last night after earnings news, and all they did was honestly explain that the lofty expectations about beverage growth were a bit overblown. But when you are a 300+ stock, any misstep will cause a double digit pullback, and SAM was trading near $40 lower in overnight markets.
Finding Market Solace at the Bottom of a Frosty Mug
I love the Sam Adams story because it is improbable that food and beverage stocks would be a haven for investors back in 2008, when many were questioning if US Equities would survive the mortgage quake. But SAM share prices hit another gear in late 2012 when trading at $110 p/s, and made this large unprecedented run to 300. How they did this is still unclear to me, but often, momentum stocks like these defy logic.
Most hedge fund managers love to buy stocks they own into strength. It is a high wire act for them, and is counterintuitive for normal investors. It takes skill and conviction to sell stocks when they are falling, and on the other side of the coin, it is difficult to buy stocks when they are running away from you. If you had hesitated adding to your position in SAM in late September 2012 when you could have added shares at $150 and waited until a few earnings reports had gone by, you would have paid $250 per share.
I can also tell you that the investors you manage money for would have NOT been happy - missing moves like this in positions you profess to own is a good way to get fired, and pension funds and the high net worth crowd will pull money and give it to the hot PM. I know - it happened to me before I learned to sharpen my skills in buying into strength and selling into weakness.
The Sam Adams run may be over (or maybe not, I really don't know). In point of fact, no one knows - not even the founder who we see on the commercials, or the happy bearded brewers who discuss hops and grains and fermentation. But one thing I can tell you is that the CEO who sold shares (automatically, the way he should) took millions of dollars off the table for himself while I sat at that same bar sampling his draft beer.
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