STOCK WATCH


Bet on Boston Beer Company

Bob Frick

The maker of Sam Adams Lager could have a great quarter if its hometown heroes, the New England Patriots, win -- or lose -- the Super Bowl.



If you believe in the Super Bowl Predictor, the stock market is a 14-point underdog going into the February 3 championship game. Investors, though, can take heart: When the Patriots meet the Giants in Super Bowl XLII, a single stock is sure to benefit, no matter which teams wins.

First the bad news. The freakishly accurate predictor holds that a victory by the NFC champion means that the Dow Jones industrial average will rise in the ensuing year. The rule has been accurate more than 80% of the time.

The New York Giants, who won 13 games and lost six during the season, reside in the NFC. The heavily favored New England Patriots, who won 18 games and lost none, are the AFC champion. The Pats are favored to win by two touchdowns. As if the market isn't having enough problems.

Now the good news. The success of the Super Bowl Stock Market Predictor is mere coincidence. With a little searching, you can find a correlation between the stock market and many things. For example, a couple of professors have proven through rigorous statistical testing that stock markets rise and fall in tandem with U.S. ice consumption and airline travel in the United Kingdom.

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Although a connection between football and stocks is bogus, it's harder to deride the correlation between football and beer. And in New England, the brand to buy is the Boston Beer Company (symbol SAM).

You'd be hard pressed to find a bar from Buzzards Bay to Swampscott that doesn't serve Boston Beer's Sam Adams Lager and its seasonal brew. I've mentioned SAM before, but the stock has been too pricey for my tastes. By a happy coincidence, though, the shares have plummeted since last November and look tasty just as Patriot fans get ready to deliver what may be SAM's best quarter ever.

Steven Rogé, portfolio manager for wealth management firm R. W. Rogé & Company, remembers his first exposure to Sam Adams. He was a student at Bryant University, in Rhode Island, when he noticed that friends from Massachusetts would bring six-packs of Sam Adams to parties and "never put them down. They were very protective."

Boston Beer produces a "high quality craft beer product for the masses," and has a chief executive, Jim Koch, "who will not sacrifice the quality of the brand," Rogé says.

The stock, $53 in October, closed January 25 at $34.99, up 0.23% for the day. There are two reasons for the big decline: Boston Beer is investing in its future and the price of its signature ingredient is rising.

The company recently bought a brewery in Lehigh, Pa., for $55 million, and will have to sink in another $100 million for upgrading. Wachovia analyst Jonathan Feeney says the new brewery will triple in-house capacity (Boston Beer also contracts out some brewing), which the company needs to meet increasing demand.

That investment will cut into profits, as will the rising price of hops. If you've seen Sam Adams commercials, you know that Boston Beer uses three times the amount of hops that traditional beers do.

Lately, though, the hop crop has seemed cursed. Everything from floods to droughts to warehouse fires have cut the worldwide supply and driven up prices. As a result, earnings are under pressure. Analysts estimate the company earned $1.74 per share last year and see profits falling to $1.68 per share in 2008.

Both Rogé and Feeney make a strong case that the SAM selloff has been overdone. "The stock market is too worried about the short term," Rogé says. "If you look at net asset value of the firm and the value of its brand, the company hasn't missed a beat."

And if you look at the long-term rise of the stock, it's been a pretty steady climb except for the recent setback. The recovery may not happen quickly, but when SAM rallies, you can say you got in near the bottom.

Picking a stock to play off the Giants is a bit more problematic. For one thing, although the team may be called the New York Giants, its stadium is in New Jersey. Too bad you can't invest in tolls for exit 16W of the New Jersey Turnpike.

Financial planner Timothy Hayes of Landmark Financial Advisory Services in Rochester, N.Y., suggests that New Jersey-based Johnson & Johnson (JNJ) might experience a blip in business because a Super Bowl means "somebody's going to need a Band-Aid."

Then there's the question of quarterback Eli Manning. In the past, you might expect a bump in the businesses for which a quarterback is spokesman. Certainly there are many to choose from for Eli's brother Peyton, the quarterback for the Indianapolis Colts and a ubiquitous pitchman. After the Colts won last year's Super Bowl, Eli's big brother made $13 million hawking for Sprint, Gatorade, Reebok, MasterCard, Sony, DirecTV and Tweeter, according to Sports Illustrated.

Eli, though, lives deep in Peyton's shadow. In fact, the speakers' bureau that represents Eli lists one of his attributes as looking like Peyton "both on the field and off." Implied here is that you could hire Eli to speak, put a Colts uniform on him and the audience would not know the difference.

However, Eli Manning is a spokesman for Citizen Watches, which depicts him in print ads as "unstoppable," just like its timepieces. Should Eli pull off a minor miracle and win the Super Bowl, shares of Citizen could get a boost -- unfortunately you'll have to buy it (or short it) on the Tokyo Stock Exchange.

Then again, if the Giants win, all those Patriots fans may double their consumption of Sam Adams to drown their sorrows. See? Win or lose, SAM's a winner.




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