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On the back of a sell-side initiation, Keith shorted SAM in the Hedgeye Virtual Portfolio today.

We retain our bearish outlook on Boston Beer Company despite a positive sell-side initiation.  On March 9th, I wrote a note titled, “SAM – DEPLETING EXPECTATIONS”, discussing SAM’s 4Q earnings.  In short, I noted difficult top-line comparisons, energy cost exposure, and a new “Freshest Beer Program” that will reduce EPS by $0.20 to $0.30 as it causes shipment growth to lag depletion growth during FY11.  The combination of a slowing top line and peak margins coming under pressure from elevated input costs does not bode well for this company going forward. 

Furthermore, the quantitative setup is “very bearish”, according to Keith McCullough.  On SAM, Keith says, “The TRADE and TREND lines are converging above the current price; this is a very bearish leading indicator”.

SAM – RISK MANAGEMENT UPDATE - sam levels

Howard Penney

Managing Director