One of our favorite companies, Boston Beer (SAM, $152.14, up $4.61), is reporting earnings after the close today with shares at all-time highs. We purchased the stock in early December 2009 in the low $40’s so our investment is up nearly 275%.
The suit-and-ties are looking for earnings of $1.25 a share on revenue of $152 million. The 4 analysts who follow the company have been way off in their estimates over the past year so expect SAM to come in with much wider (or smaller) per share earnings.
We realize shares are expensive but we bought the stock as a long-term core holding and we wouldn’t be surprised if one of the bigger breweries made a bid for the company this year or next. We would like to see a stock-split that would make it easier to play the options and a 3-to-1 split would be right up our alley.
For example, the Boston Beer March 155 calls (SAM130316C00155000, $3.50, up $1.15) are up a cool 50% today but are expensive as a near-term in-the-money option play based on earnings. We do like the March 165 calls (SAM130316C00165000, $1.15, $0.80) and a 10% move would get shares to $1.65 but we would be worried about the premium deflating if shares didn’t push this level. Plus, the easy money has already been made as these options are up a sizzling 228%.
There is also a chance shares pullback on an earnings miss or lowered guidance which means these call options would get crushed if shares fall back below $150. The momentum and chart look great for a continued run higher but an earnings play right now is just too risky and why we own the stock instead.
We wished we would have started our Weekly Wrap sooner as a paid subscription because our subscribers would be in the stock but we have covered Boston Beer numerous times over the past few years in our Daily. We were able to close 2 more double-digit winning trades for the publication today and since late 2010 we are 49-3 for an incredible 94% win rate.
We mentioned a few weeks ago that today’s “investor” expects to make quick profits in days and weeks which is what our Daily is used for but for those of you who like slow and steady gains with much less risk, the Weekly Wrap would do your portfolio well.
As far as the market, the bulls are continuing their pursuit of fresh highs. The Dow is up 50 points to 14,031 while the S&P is higher by 8 points to 1,527. We mentioned a close above this level would be bullish over the short-term for a possible run to 1,550. The Nasdaq is gaining a dozen points and is above 3,200 at 3,204.
We have a few more call option trades that are open and one of them is getting a nice pop on a stock upgrade. Let’s go check the tape and we will be back in the morning with a full report.