Reeds Inc. (REED)

[gfp927z]

With Reeds up so much, some profit taking is expected, especially with tax rates going up next year. The stock broke neckline support, but so far is holding around the first support area (mid-Aug breakout level). If it should test the 200 MA (currently 4.50), that would be a great entry point, but it might not get that low with all the buzz about Kombucha.

Kombucha is going gangbusters, and 2013 will be a breakthrough year for the company. In the August conf call, Chris Reed explained his strategy of using some of the cash bonanza from Kombucha to fund a national ad campaign for the entire Reed's product line, with the goal of making them household names. The goal is to boost growth rates from the current 20% up into the 35% range. It sounds like his exit strategy is to eventually sell the company, and he said there has been consistent buyout interest for some time. But first he wants to build and grow the business, unless he gets 'blown away with a crazy offer'.

Revenues will top $30 mil for this year (up 20% from 2011), and with Kombucha on fire I'm figuring they'll do at least $40 mil in 2013, and then revenues should really start ramping up. Also profitability will be there because of Kombucha's extremely high margins.