Craft Brewers Alliance 2011 Shareholders Meeting

About a year ago I noted a crazy run-up in the stock price of Craft Brewers Alliance, the parent company of Widmer Brothers, headquartered at Widmer's North Portland facility.  At the time, I was amazed that the stock price (ticker: HOOK) was climbing toward $4.  Fast-forward a year, and in recent weeks it's been hovering around $9.  Somewhere in between, I made a small investment in 115 shares of HOOK, ignoring my own advice about the risks involved.

And so it was that yesterday I wandered over to Russell Street to attend the 2011 CBA Shareholders Meeting.  It was a pretty civilized affair:  Widmer Pitch Black IPA (formerly W'10) and Kona Longboard Lager were on tap, and chilled bottles of Red Hook Pilsner and Copper Hook were available.  Shareholders were given a Widmer grocery sack and invited to pick up a nice "dividend" for attending the meeting:  six-packs of the three CBA brands.  Kurt Widmer ran the meeting with a glass of Pitch Black in hand, and Prosted us with it after the brief formal business portion of the meeting.

There followed a Power Point presentation on the current marketing focus of the company.  Widmer, Kona, and Red Hook -- the three brands that remain in CBA after the sale of Goose Island to InBev -- each fulfill a different goal for the company.  Kona has great summer seasonal sales as beachgoers try to recapture that island feeling from past Hawaiian vacations (marketing speak: Liquid Aloha).  The Widmer brand aims to provide the variety that the modern beer geek demands:  this was the point of this year's rebranding, replacing Broken Halo with the Rotator IPA series, the yearly "W" releases with the more flexible Series 924 four-packs, and continuing the occasional Brothers Reserve bombers.  Red Hook is the part of the portfolio I feel a little sorry for.  This is its 30-year anniversary, and while it was a big fish in a small pond decades ago, the company has all but relegated it to downmarket status.  In Marketingese, Red Hook is sold on its "unique big personality":  the company describes it as "edgy" and "approachable", not as delicious and high-quality.

One interesting thing I learned at the meeting is that CBA really is paying attention to the blogosphere.  The Power Point slides had no fewer than three quotes from Brady's analysis of the Widmer makeover, and one quote from Sanjay's review of Red Hook Pilsner.  No quotes from It's Pub Night, but I was surprised that the Director of Investor Relations -- whom I hadn't met before yesterday -- called me by name on the street before the meeting as I wandered toward the wrong entrance.  Guess I'm not as incognito as I thought I was.

In terms of the stock, this has been a good year.  The price has nearly tripled in the last twelve months.  The sale of CBA's stake in Goose Island brought in a nice cash windfall for the company.  And the business page editors at the Oregonian have been roused from their four-year slumber and finally added HOOK to their table of Stocks of Local Interest.

Last June I listed several risks you might consider if you were thinking about buying stock in the CBA (if you are thinking of such an investment, do read that article).  I received a first-hand lesson in those risks when I took the plunge.  Here's how it happened.  Last August, with the share price threatening $5, I decided to take a gamble in an IRA account and buy 100 shares.  Because so few shares are traded, and because I placed my order late on a Friday, the brokerage only filled part of my order that day.  I was the proud owner of a mere 15 shares, meaning the $9 commission had effectively added 60¢ to the $4.93 share price.  Dammit!  That's like losing 12% on your investment immediately.  The following Monday I was able to get a full 100 shares for $4.95 apiece, though there were some tense moments as I watched the purchase get pieced together in chunks of 4 shares, 6 more, 7 more, wondering if I had just bought another expensive 17 shares, until the final 83 came through.  Moral for the small investor: bid at or above the ask price, and buy early in the day.

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.]