Ring In The New Year With These 3 Beer Stocks

Three beer stocks to consider as New Year's Eve draws near

by Josh Selway

Published on Dec 30, 2015 at 11:39 AM
Updated on Dec 30, 2015 at 11:40 AM

With New Year's Eve fast approaching, you may be scrambling to figure out your plans -- or maybe you're actually cool and have friends, so that isn't a problem for you. While you may not care what exactly you drink on Dec. 31 as long as it gets the party going, you should be a little more picky when choosing stocks. So let's take a look at the three of the more prominent beer stocks -- Anheuser Busch Inbev SA (ADR) (NYSE:BUD)Molson Coors Brewing Company (NYSE:TAP), and Constellation Brands, Inc. (NYSE:STZ) -- to see where they stand heading into the new year. (Note: I'm thirsty.) 

While BUD has been waiting to see if regulators will approve its merger with SABMiller, the stock has performed admirably. Quarter-to-date, the shares have picked up 19% to trade at $126.48 -- just below their all-time high from late November.

In the meantime, though, option traders have been bracing for a pullback. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BUD sports a 10-day put/call volume ratio of 1.20, which is higher than 75% of all other marks from the past year. This tells us that put buying has been more popular than normal lately, relative to call buying. 

Elsewhere, analysts are almost entirely bullish on the beer stock. Only one of the seven brokerage firms covering Anheuser Busch Inbev SA (ADR) (NYSE:BUD) says it's anything less than a "buy." 

TAP has also flourished on the charts, adding 27% in 2015 to hit $94.68, which is just a stone's throw from its record peak of $95.74 from mid-November. What's more, the shares have found solid support recently atop their rising 32-day moving average. 

Still, short-term option traders have positioned themselves in an unusually put-skewed fashion. This is according to TAP's Schaeffer's put/call open interest ratio (SOIR) of 0.64, which is just 10 percentage points from an annual high. Put differently, speculators targeting contracts that expire within the next three months have shown a stronger-than-normal attraction for puts

At the same time, like BUD, analysts can't get enough of the stock. Eighty percent of the analysts that track Molson Coors Brewing Company (NYSE:TAP) say it's a "strong buy." What's more, the stock's average 12-month price target stands at $107.13 -- representing over 13% upside to current levels, as well as uncharted waters.

Lastly, STZ has really bubbled to the top of the charts this year. At $144.26, the stock has increased 47% year-to-date, and just hit an all-time best of $144.87 yesterday -- though that's not exactly surprising. Shareholders would now like to see the shares topple the $145 level, which has blocked recent breakout attempts. 

Option traders aren't so sure this is going to happen, though. STZ's 50-day put/call volume ratio at the ISE, CBOE, and PHLX is 1.15, just 4 percentage points from an annual high. In short, bearish betting has taken the beer stock's option pits by storm. 

By contrast, the brokerage bunch has made its bullish opinions clear. Seven of 11 analysts following Constellation Brands, Inc. (NYSE:STZ) say it's a "buy" or better, and none have issued "sell" recommendations. 

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