We are recommending buying a 2% position in STZ (Constellation Brands), funding from cash.
Investment thesis:
· Adding STZ helps position our portfolio to be more defensive at this stage of the economic cycle
· STZ is down ~20% YTD, giving us a good entry point
· STZ continues to have HSD top line growth and high margins that should incrementally improve going forward
· STZ comes out of a heavy capex investment cycle to support its growth: FCF margins are set to inflect thanks to lower capex
Company description:
$35B market cap, $8B in sales, $1.2B in FCF
STZ owns the fastest growing beer portfolio in the US and is the #1 multi-category alcoholic beverages supplier in the US
The firm generates over 97% of its revenue in the U.S.
100 brands including:
v Imported beer: Corona, Modelo, Pacifico: owns the rights to distribute in the US
v Craft beer: Ballast Point
v Wine: Robert Mondavi, Black Box, Clos du Bois
v Spirits: Svedka
Julie S. Praline
Director, Equity Analyst
Direct: 617.226.0025
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square
Suite 500
Boston, MA 02109