Consumer Sector Ideas

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Reeds -- >>> 3 Small Caps That Got Away And May Keep Running



August 1, 2012



http://seekingalpha.com/article/768191-3-small-caps-that-got-away-and-may-keep-running?source=yahoo




My final miss was again in the food and beverage industry. Reeds, Inc. (REED) is a brewer of natural sodas, including its flagship Ginger Brew and Virgil's Root Beer. The company has additional products including other naturally brewed soft drinks, candies, ice cream, health drinks and most recently, Kombucha.

Since the beginning of the year, the stock has shot up nearly 350% lead by significantly increased revenues and gross profit margins. In addition, the company has been aggressively expanding its distribution through several new agreements across the U.S.

Reeds, Inc. 1-Year Chart (click to enlarge)

Reeds has a lineup of very unique and high-quality products, but the beverage industry is highly competitive going up against companies like Coca-Cola (KO), which has been battling it out with PepsiCo since before many of us were even born. Reeds does try to separate itself from the competition by offering a higher quality product than the major producers and marketing that product to natural and gourmet food stores in addition to large retailers.

Is Reeds the next Hanson's Natural (now Monster Beverage Corporation (MNST))? It is too soon to tell, but it is certainly worth continuing to follow the stock . It is important to note that while Reeds has had a good run, it is still well off its historic highs. The company seems to be moving in the right direction, but is still losing money with a balance sheet that is far from rock solid. Given the first big move has been missed, it is probably worth sitting on the sidelines for another quarter or two and see if revenues continue to grow and turn into a positive bottom line.

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