Long
Beam Inc (BEAM)
Wednesday, November 20, 2013
Company | Symbol | Industry | Rating | YTD % Gain | Target | Stop |
Beam Inc | BEAM | Distillers & Vintners | 7.6 | +10.72% | $70.10 | $66.70 |
The Trade:
Today's Trade of the Day is a long swing-trade of the makers of Jim Beam, Beam Inc (BEAM). Given the extended nature of the market and heightened risk at these elevated levels, now feels like the right time to trade more conservatively. While taking shots on some of the more speculative stocks is always fun, BEAM represents a good trading opportunity and is a relatively less risky bet.
BEAM was having a decent year until a tumultuous summer hit alcohol producers (see also: Molson Coors (TAP), Anheuser Busch (BUD) April - July). After bottoming out around $61 at the end of August, BEAM has been on a bullish run through Q3 and into the final couple months of the year. Though the action has been choppy, BEAM features a set of higher highs and higher lows while maintaining healthy levels relative to its 50-day moving average.
BEAM recently hit highs of $70.34 on October 29th, which is also the current short-term resistance level. Analyst Robert Ottenstein of ISI Group initiated BEAM on November 8th with a price target of $70, and BEAM's positive intermediate- and short-term trending suggest that the stock will push towards this price moving forward.
Thus, today's trade will be to play the long side of BEAM for a test of recent resistance at $70.34. BEAM doesn't make its next earnings announcement until January 24th, 2014, so there is lessened risk of a volatile down-day during the holding period. To limit downside risk, our stop will be right at last Wednesday's intraday low ($66.67), as a close below this price would indicate that the technical picture no longer favors a move higher. The upside on this trade is +3.15% while the downside risk is -1.88%, making the reward to risk ratio a little over 2:1.
Obviously BEAM's potential upside isn't a home-run play, but playing a little more conservatively feels like the right thing to do given the market we're currently in.
Entery Method:
Buy at the current price (~$67.95).
Exit Method:
Sell at a close below $66.67 (Breakdown) / An intraday price of $70.10 or above (Profit-Taking)
Company Profile:
Beam Inc. (Beam) is a premium spirits company that makes and sells branded distilled spirits products in markets worldwide. The Company's principal products include bourbon whiskey, tequila, Scotch whisky, Canadian whisky, vodka, cognac, rum, cordials, and ready-to-drink pre-mixed cocktails. Beam's portfolio consists of brands it identifies as Power Brands, Rising Stars, Local Jewels and values Creators. The Power Brands are its core brand equities, with global reach in premium categories. Rising Stars are smaller premium brands. Brands identified as Local Jewels act as Power Brands in local markets. Beam's three reportable segments are the geographic regions, which include North America, Europe/Middle East/Africa, and Asia-Pacific/South America . Each segment is engaged in the manufacture and sale of distilled spirits products. In May 2012, Beam acquired the Pinnacle vodka and Calico Jack rum brands and certain related assets. In January 2012, Beam acquired Cooley Distillery plc.
Stock Rating:
The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest.
Disclosure:
At the time of publication the editor and affiliated companies own the following positions:
None
Note: Positions may be bought or sold while this publication is in circulation without notice.
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