Tuesday, June 1, 2010

Strike It Rich in Beer

Occasionally I'll check the stock price of the Craft Brewers Alliance, the company formed by the merger of Widmer and Redhook.   It surprised me this morning, not so much with its 6-7% rise today, but by the fact that it has risen about 50% since I last checked the price a few weeks ago.  The price got up to about $3.95 this morning, but looks to close a little below that [Update: wow, closed at the high of $3.95].  Compare that to the $2.62 closing price three Fridays ago (May 14).

Wouldn't it have been nice to put some money on that last month?  Or last summer when the share price was below $2?  On the other hand, I don't feel too badly for missing the boat -- there are a lot of high-risk factors on this stock if you're an individual investor:
  • Thinly traded: most days fewer than 10,000 shares are traded
  • Controlled by insiders: 57% of shares are owned by insiders
  • Not followed by analysts: no one is researching the company and publishing earnings estimates 
  • Price/book ratio: below 1.0, which could mean it's undervalued, but could mean some nasty writedowns are on the horizon
  • Been through a couple years of red ink, showing losses instead of profits
In fact, this recent run-up is itself a good illustration of the risks you or I would face investing in CBA.  The stock went up by 13% on Monday, May 17, a day before the conference call that told the world about the company's quarterly results.  The day of the conference call (which was during the trading day), it went up another 17%.  By the time the results were published by a news source on Wednesday May 19, the price had stabilized at the new levels.  That looks like a fun ride, but imagine if you were an investor and the price had moved in the other direction: you would have to be watching it like a hawk not to lose 30% over a couple of days.

I'm a big fan of Widmer's line, and it's interesting to watch the company grow their business.  Someday I may get up the nerve to invest a little of my savings in the CBA, but for now I'm just a spectator, occasionally dreaming of what could have been.

[Update:  I did take the plunge and buy some HOOK at about $5.  And the "thinly traded" warning up there is true:  my first order of 100 shares only found 15 shares at the limit price, so instead of a 10¢ per share commission, I effectively paid 60¢ per share. Further reading: my account of the 2011 CBA shareholders meeting.]


  1. Brian msubulldog25June 4, 2010 at 10:01 PM

    Wow...crickets here, Bill...maybe stick with 'Pub Night' vs. 'Mad Money' ;-)

    As a proud holder of HOOK (Craft Brewers Alliance) shares, my 'fortune' has risen from $262 to $395 in 3 weeks...woo hoo! I even attended the CBA Annual Meeting last week - Kurt Widmer moderates - and the parting gift was a mixed 4-pack of Kona, Redhook and Widmer beers + a Redhook DIPA bomber...nice 'dividends'!

    Buy now!

  2. Crickets? Ouch!

    It's funny, the posts that organically get the most pageviews are reviews of individual beers. Yet that's the kind of post I feel most conflicted about.

    So, when did you buy your 100 shares? That beer dividend sounds pretty good.

  3. Brian msubulldog25June 5, 2010 at 7:39 AM

    I had some extra $ when 4-5 years ago in an IRA and decided to put some into HOOK (at the time it was just Redhook; since the '08 merger into CBA Widmer is now included). Also bought some shares of SAM (Boston Beer Co).

    This year was my first time going to the shareholders meeting, and I'll have to say it was fun to see what goes on at one of those (a mix of dry business stuff, a marketing re-cap/preview, a Q&A session...and not just the take-homes, but 3 tap handles and food pairings...). The meeting is held at the end of May every year; and it's open to anyone, I think (even if you DON'T have shares)...see you there next year?