Small-Cap Throwdown: Craft Brew Alliance (Brew) Analysis

Steve Kanaval |

Equities.com’s Small-Cap Throwdown is a brand new investment newsletter focused on finding the best underdog stocks you haven’t heard about. It is authored by Wall Street veteran and notorious straight shooter Steve Kanaval in his distinctive style. In each issue, readers can expect Steve to comb through a no-holds-barred melee between a hand-picked group of feisty welterweight title contenders to determine their industry’s king of the ring. The first issue of Equities.com Small-Cap Throwdown pits the hottest beverage small-cap stocks against each other to find a winner. Here's Steve's take on Craft Brew Alliance (BREW) and sign-up here for a free issue!

About the Company

Craft Brew Alliance, Inc. engages in brewing and selling craft beers and ciders under the Kona, Widmer Brothers, Redhook, Omission, and Square Mile. It operates in two segments, Beer Related Operations and Pubs Operations. The company also operates five pubs that offer dining and entertainment facilities, and sell apparel and other merchandise.

What Other Analysts Won't Tell You

In April, BREW reconfirmed guidance for the rest of the year. While that may be good news on the surface, it’s actually a double-edged sword for investors if you consider the fact that they missed their numbers twice in 2014, which sent shares plummeting from the highs above the $17 level to retest support at $10. If the company continues this trend, no self-respecting portfolio manager will stay around on the long side, no matter if they like the beer or not.

The new CFO, Joe Vanderstelt, is a Coors guy who watched the company go through an acquisition, but his skills are in making and integrating acquisitions. I expect this to continue, with BREW swapping shares for small brewers and tacking on some revenue. I also see the Kona brand expansion coming online, and I do not see this built into the stock. The recent sell-off back to the $10 level is critical to watch. Expect these levels to hold and get a bounce back to $12. This stock is worth revisiting once the new CFO gets settled and sales are out for the new Hawaiian facility.

BREW.jpg

What Can the Stock Do in the Next Few Quarters?

Shares of BREW have stayed above $10 since 2013 even when they miss numbers and any selling gets absorbed by new buying or shorts covering. There aren’t many short sellers in this stock, and it is hard to borrow for the shorts. Consumer brewers have exploded over the years, and it can be a great business once the brand gets traction. Marketing in 2015 can be a more creative venture, using new technologies like social media tools. I expect to see Craft beef up this position in the company.

Things I Hate About Craft Brew Alliance

BREW had two down drafts in 2014 from its high of $17 per share, and both were related to earnings misses. So meeting numbers is important for investors, no matter what management says about the future. Many of you know their brands such as Redhook and Widmer Bros, which are carried in nearly every sports bar. The company also operates their own pubs, which contribute to the revenue buckets. It is wise for investors to listen to all conference calls and understand what Wall Street expects for these brewers, especially if you intend to have them in your portfolio.

See the rest of the Small-Cap Beverage Throwdown here.

Steve Kanaval is the author of the upcoming Equities.com's Small-Cap Throwdown, a premium newsletter designed to help investors identify the best small-cap stocks to add to your portfolio and trading ideas to profit off them. The first issue pits the hottest beverage small-cap stocks against each other to find a winner. Sign-up here for a free issue today!

Button_.jpg

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BREW Craft Brew Alliance Inc. 15.35 0.15 0.99 89,337

Comments

Emerging Growth

CMX Gold & Silver Corp.

CMX Gold & Silver Corp is an exploration stage company. The Company is engaged in the acquisition, exploration and development of silver and copper/gold properties in the USA.

Private Markets

Knightscope

Autonomous security robots providing advanced detection capabilities at $7 per hour - aiming to define the future of security. Help #StopTheViolence.

8tracks

Our mission is to be the best place for people who care about music to create and discover thoughtfully curated playlists. In essence, 8tracks is a platform for online mixtapes.