What do you do with Constellation Brands (STZ) ? I think it is very disconcerting that the company guided down so big. I am very worried about the company actually becoming one more beer casualty like Molson (TAP) or Anheuser Busch Inbev (BUD) . The stock has been one that we have wanted to buy for the charitable trust for ages, particularly as we sold it in the two hundreds. We have been itching to get back in.
So you have to ask is it de-risked or is it just another once hot growth stock grown cold.
To me if the company were standing still or in denial the choice would be easy -- forget about it. But the company said it was disappointed, it is taking action and it does own a big chunk of the best cannabis company on earth in terms of market share and intellectual property: Canopy Growth (CGC) . If you think, for example, that the reason for the disappointing low-end spirits numbers is that people would rather get high on legalized pot than on under $10 wine, then CEO Rob Sands has you covered. If you believe that the company has a stretched balance sheet, as one analyst said today on CNBC, you should look at their incredible cash flow which will allow them to buy back more than $4 billion in stock at the same time that they increase their stake in Canopy.
It is not just another liquids company. It's got the bases covered.
All that said, there were a bunch of analysts who upgraded the stock in the last 10 days and that's a big reason why the stock fell so hard. If they hadn't talked it up I believe the stock could have had a much better day.
We are in a market where if you screw up, your stock is basically finished until the next quarter. That could be the case with Constellation. But I think they are motivated to make sure that doesn't happen.
You can wait. Or you can walk away. But my view is that the stock isn't finished, it's just a lot cheaper -- and more intriguing -- than it was yesterday.
