Trading at $61.20 as of May 3, 2002
Well, Mom, instead of buying you a bottle of fine wine for Mother's Day, I thought you might enjoy owning shares of a company that makes fine wine. It also imports and distributes beer and spirits. It's called Constellation Brands
For instance, Paul Masson, Almadan, Inglenook, and Manischewitz are part of its Canandaigua Wine segment. Beer and spirits are handled by Constellation's Barton segment, and there are some big names there. Corona, for instance... that cool beer that all the yuppies like to drink with a lime. There's also Black Velvet and Fleischmann's spirits, as well as many others. The company even has operations in the United Kingdom, where its Matthew Clark division is quite a force.
Constellation is classified in the "beverage alcohol" industry, which seems to hold up pretty well in both good times and bad. The industry usually lumbers along, growing about 1% a year. Steady, somewhat safe, but entirely unspectacular.
Constellation, on the other hand, is aiming for 15% annual growth over the next few years. It hopes to accomplish this with about 7% or 8% growth internally, and the same amount through acquisitions. So far so good on this front -- the company recently reported full-year earnings of $3.14 a share, which was a 21% increase over the previous year.
I should also mention Constellation's management. Remember last Thanksgiving when we were talking about that corner store that seemed to change hands every year until old man Johnson took over? We just knew he was going to make it work, because he knew his business. I get the same feeling about Richard Sands, who's Constellation's CEO. If you read his interview in the Rochester Business Journal, you'll see what I mean. It sounds like he has what it takes to pull off all these acquisitions, which is always a tough thing to do.
And internally, he seems to have a good staff that has come up with some innovative products. For example, they developed the Arbor Mist line for folks who want to drink a wine product, but aren't keen on the taste of traditional wine. And so drinks like Blackberry Merlot and Strawberry White Zinfandel are selling extremely well, and have spurred imitation products from competitors.
One thing I should warn you about: The stock price is at an all-time high, and could well pull back somewhat. Of course, no one can predict these things (least of all me), and it's trading at trailing P/E of about 20, and at about 15 times next year's earnings -- which is certainly not outrageous. But I'd understand if you felt like waiting a bit so you can really study the company and maybe wait for a better price.
Whatever you decide, enjoy your day!
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