Summary
- The Boston Beer Company has commonalties with Monster Beverage; a legacy beverage maker being reignited by leading an emerging category.
- Competition is fierce, but I believe the business has the perfect mix of resources and brand image to defend its competitive position.
- The combination of a strong brand and the consistency of cash flows enable high-quality beverage makers to trade at premium multiples.
- It's always better buying stocks when prices decline, but I think The Boston Beer Company is a modest buy at the current price.
Shares of The Boston Beer Company (SAM) are up a staggering 130% year to date. The business has been buoyed by the popularity of its hard seltzer brand, Truly. It's estimated that Truly is the second largest player in the space with 21.8% market share, far behind the leader, White Claw, at 58.6%. But, search interest for Truly was much higher than White Claw over summer 2020.
Gaining share on White Claw could amplify the upside for The Boston Beer Company, but I don't count on it. There are other factors that lead me to believe that, despite the run-up, shares of The Boston Beer Company have more room to run.
Similarities to Monster
The Boston Beer Company has many commonalities with Monster Beverage (MNST). Monster was a little known California-based juice maker known as Hansen's Natural before the creation of Monster Energy. Monster finds itself on the list of one of the greatest investments in the public markets ever. The stock traded for a handful of pennies per share before the introduction of Monster Energy. Even over a year after Monster Energy was introduced, the stock still traded below $1 per share, an 80x return in 15 years.
