Vina Concha y Toro S.A. (ADR) (NYSE:VCO)

AjOrellana (33.75) Submitted: 3/7/2011 2:19:06 PM : Start Price: $44.43 VCO Score: -21.36

This Chile's largest wine maker( I love chile & wine!). There are a number of reason why I believe this stock will outperform the S&P 500. First, it is undervalued relative to the industry. Second, recent actions by management will further open up the American market(eventually they will be globally competitive), and finally, demand from China and other emerging economies will benefit this awesome wine maker.

It is undervalued because:

Current P/E Ratio    of 20.1 vs. 30.2 in the industry A Price/Sales Ratio of only    2.23 when the industry is at 3.34. In regard to the price relative to its book value, Price/Book Value is at   2.29 vs 4.56 in the industry.

The fact that it is under valued and they it can continue to grow if reinforced by some of its liquidity ratios and debt levels:

A current ratio of 1.9 and the industry's is 1.0 Quick ratio is 1.1 vs .8 in the industry. A leverage ratio of 1.6 vs 2.4 in the industry. A debt to equity ratio of .22 vs .74 in the industry.

All these numbers mean that VCO is undervalued, has a lot of cash at hand relative to its competitors, with a low levels of debt. This means that it has potential for growth.

This is show in their latest acquisition of Fetzer Vineyards. This move will allow them to control 5 american brands of wine. These brands generated US$156 million sales in 2010. This move will allow VCO to extend their presence in the global market.

The final reason, is a more "macro" reason why i think companies like VCO will ultimately benefit from other emerging markets. Have you heard of the "New Silk Road"? well, its refers to the trade between emerging markets, which links them to the enormous demand from China. So remember this: Billions will come out of poverty in our lifetimes, these people will begin to consume as their stand of living increase. These means that companies that are well positioned globally, will benefit from this demand! :)