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Boston Beer (SAM) Makes A Cheer

|Includes: Boston Beer Co. (SAM)
1:10pm (EST)

The bulls are pushing the market higher after getting some better-than-expected economic news which has helped relieve some of the euro tensions from this morning. The Consumer Price Index for November increased 0.1% after a 0.2% increase in the prior month. It had been expected to increase 0.2% month-over-month. Core consumer prices for were up 0.1% after coming in flat two the previous three months. Meanwhile, the New York Empire manufacturing for November came in at 10.57, which was better than estimates for 3.0 that had been expected.

Although the market action is rather lackluster today, we are expecting a big move on Friday with December triple-witching. This has been a flat event for 2010, but historically, December is money with average gains of 2%. Triple-witching is when contracts for stock index futures, stock index options, and stock options all expire on the same day and it happens four times a year in March, June, September, and of course, December.

One stock we want to talk about today is the Boston Beer Company (SAM, $95.75, up $11.00) which is seeing a 13% pop in its shares. The company raised its 2010 yearend profit estimates and said earnings would be in the range of $3.30-$3.60 a share. Last month, Boston Beer forecast earnings of $2.85-$3.15 a share.

We have been watching this stock since early February when it was in the $40′s but the option pits just aren’t liquid enough for us to play them.  However, we often mention “story stocks” on our site from time to time and this is one of them.  In fact, here was an update on the company from May 4 (quotes are from that day):

“Another company we are watching is The Boston Beer Company (SAM, $58.63, up $1.62) which we have mentioned inside our Members Area a few times.  Although we are not stock traders, these are shares we wished we would have picked up in the mid-$40’s back in February.  We were looking at an option trade but there wasn’t enough liquidity for us to go long.” (NYSE:END)

The average daily volume for the stock is just 75,000 shares which, like we said, makes it hard to trade options because of the bid/ask spreads which are usually jacked-up due to the lack of volume. However, the December 85 calls (SAM101218C00085000, $ 10.45, up $9.65) are up over 1,200% today but only 16 contracts have traded. It's pretty obvious shares want to test $100 on the “blue-sky” breakout but we are hoping for a 2-for-1 stock split, or 3-for-1, which would make shares cheaper for the average investor and possibly get more volume flowing into the stock and option chains.

We got to leave it there as we have a number of things to cover in our Members Area today. As we head to press, the Dow is up 7 points; the S&P is down 4; the Nasdaq is off 5 points.

We will be back in the morning but we are still seeing golden opportunities as we look out into 2011. If you are not a current subscriber, we urge you to consider this opportunity to get on board. Subscribers, check for the updates.