Constellation Brands, Inc. (STZ)

boiseidfool (71.72) Submitted: 3/11/08 12:26 AM : Start Price: $19.15 STZ Score: 16.67

Constellation is the largest wine company in the world; a leading producer and exporter of wine from Australia, New Zealand and Canada; and both a major producer and independent drinks wholesaler in the United Kingdom. With more than 250 beverage alcohol brands marketed in nearly 150 countries, Constellation offers consumers their beverage of choice for any occasion. Most of their fare is wines, but they also have some limited spirits, including Black Velvet, and beers, including Corona Extra, Corona Light, Modelo Especial, Pacifico, Negra Modelo, and St. Pauli Girl from Germany. Among their more well-known wines are Mondavi, Ravenswood and 3 blind moose. Constellation is a small-cap stock with both growth and value characteristics, whose earnings have increased in 10 of the last 12 years. As of mid-March 2008, STZ has an intrinsic value per share of $25.48, assuming a projected earnings growth rate over the next 10 years is 12.00%. STZ currently sells at $18.70 per share, which is a 26% discount to its intrinsic value. For $134 million, they just sold a small winery and their historic, but time-worn Almaden and Inglenook wine brands, which have a long history, but now sell for about $3 a bottle, and have lost their appeal with today’s wine consumers. On the down side, STZ doesn’t pay dividends. Institutional investors own 90.0% of STZ’s shares, but insiders own less than 1%, which is not ideal. Like another CAPS contributor, though, I believe that the looming recession and political season equate to increased alcohol consumption, which is why I selected them to OUTPERFORM.

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