Are You Drinking Sam Adams This New Year's Eve?

During the holiday season, stocks relating to food and drink frequently perform well. Given how volatile the year has been, investors may be looking for safe assets. Food and beverage industries in the consumer goods sector are traditionally risk-averse and less affected by cycles in the market. Investors may wish to pay attention to these stocks into the New Year. The brewery industry enjoyed a relatively solid year in 2011. According to The Brewers Association, craft sales jumped 14% to 5.1 million barrels in the first half of 2011 after rising 11% last year, putting them on course to log their fastest annual growth rate since 1996. Over the same time period, the overall beer market declined 1% by volume. Some investors may consider large companies like Anheuser-Busch

, which brews Budweiser, and MillerCoors. Together, they boast a combined U.S. market share of more than 75%. However, for retail investors, it may be better to focus on smaller companies. According to behavioral finance and empirical studies, retail investors may wish to avoid dealing in the stocks that everybody is talking about—instead, investors may want to look at more obscure, small and mid-cap stocks. Investors may note that Boston Beer Company

has some properties of value. Boston Beer is a major brewer of handcrafted, full-flavored beers. Boston Beer offers over 30 different brews. The company has roughly 1% of the US beer market and 1.42B in market cap. Boston Beer expects to spend as much as $35 million in capital investments next year at its brew-houses in Ohio, Pennsylvania and Massachusetts. The company's shipments rose 6% to 1.8 million barrels in the first nine months of 2011. It has the distinction that it's the largest craft brewery in the country, which has always been a focus of the company. However, there is one important fact that investors may not want to overlook: Boston Beer has been implementing a just-in-time inventory program, as it intends to deliver fresher and better tasting beer to consumers. Although this may prove good for the company in the long run, for the time being, the program has been a drag on earnings thanks to increased implementation costs.

Perhaps the greatest point in Boston Beer's balance sheet is that their total long-term debt is zero. With over $48 million in the bank and no debt to pay off, the company operates with a high degree of liquidity. Moreover, in terms of free cash flow, FCF/share is a valuable metric signaling a company's ability to facilitate growth. Boston Beer has the highest FCF per share of $3.97 in the Brewer industry. Second is Molson Coors Brewing

, with an FCF per share of $3.08. Finishing up the top three is Craft Brewers Alliance

, with an FCF per share of $0.35. For Boston Beer, growth metrics are strong, such as the company's 35.57% return on equity, which ranks top among 44 companies in the same industry. Gross margins are at 55.65%, while operating margins are at 15.74%. Both are above the industry average (41.79%, 10.35% respectively). From the perspective of P/E ratio, Boston Beer seems overvalued. Compared to the industry average P/E ratio of 13.58, it is at 25.28. Its PEG ratio is 3.28, highest among all the 44 companies in the industry, and far above the fair value of 1. Although Boston Beer might be a good investment in the long run; traders will need to be careful about picking the right time to get into this “beer” market.