- Shares of Budweiser's parent company Ab-InBev are down more than 40% in 2020.
- Meanwhile, shares of rival Boston Beer Company soared to new all-time highs.
- This one pro says Boston Beer's stock is overbought while Ab-InBev's is oversold.
The “king of beer” Anheuser Busch Inbev NV (NYSE: BUD) is certainly not the king of Wall Street as it appears this one rival could dethrone Budweiser’s parent company as the king of Wall Street.
But should investors buy the rally in Sam Adams’ parent company Boston Beer Company Inc (NYSE: SAM)? Miller Tabak’s Chief Market Strategist Matt Maley discusses on CNBC’s “Trading Nation.”
Budweiser loses its throne
To say that Ab-InBev has had a bumpy ride over the past few months is an understatement. In fact, the global alcohol giant was forced to scrap the $10 billion initial public offering of its Asian unit back in July 2019 due to a poor investor reception. While the company proceeded with its plans a few months later, investors have been left with a hangover.
The stock was among the few that didn’t participate in the early 2020 rally and is down more than 40% since the start of the year versus a 5.6% decline in the S&P 500 index. Earnings haven’t been kind to the company despite a surge in COVID-19 inspired alcohol sales.
A new king is crowned?
Shares of Boston Beer Company are up more than 40% since the start of 2020 and hit a new all-time high Friday at $566. The huge run over the past few months has now pushed the stock clearly into overbought territory, at least based on a relative stock index (RSI) chart.
RSI is a measure of a stock’s trading strength and a reading above 70 implies it is overbought while a reading below 30 implies it is oversold.
In Boston Beer’s case, the RSI level returned to a level not seen since last August when the stock lost around $100 per share or more than 20%, Maley said. However, by the same metric, Ab-InBev’s stock is starting to look attractive.
The king stays the king
Shares of Ab-InBev have rallied more than 15% in a few short days and the same RSI chart still points to an oversold condition, he said. Granted, the stock is no longer “wildly oversold” as it was over the past few weeks, but nevertheless “it is still oversold.”
Looking at Ab-InBev’s daily stock chart over the past year shows a few instances where the stock tried to rally to the $50 level but has failed on several occasions. If the recent momentum can sustain, shares “can finally break above that” level. If successful, it should have a “lot of upside momentum.”
But before getting ahead of themselves, investors need to be reminded to “wait for that actual break to take place,” he concluded.