Opinions
Colin Stewart
Corby Spirit and Wine (A)
CSW.A-T
DON'T BUY
Apr 24, 2018
$19.600
Stock price when the opinion was issued
breweries
beverages
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PAST TOP PICK
(A Top Pick Nov 27/18, Down 6%) They had a special dividend at the end of 2018. He likes this a lot. Cannabis will likely cannabilize a lot of beer sales. In the U.S. beer sales are hit when a state legalizes weed, but not wine and spirits. They keep generating cash and special dividends.
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DON'T BUY
A solid company with a good balance sheet and nice yield. There is a modest opportunity for upside. Since 2012 they have traded between 2.5 and 3.5 times book, with a downward basis trend. The share price is unchanged in ten years and has added no value to investors in that time. He calls these stocks, "grazers" -- too comfortable to become "wolves". Nice company -- it is not going anywhere.
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COMMENT
A cash machine. Owned by Pernod-Ricard and pays a decent dividend. Occasionally, it pays a special dividend. Hard to know what the future is. A safe, defensive stock. Will Pernod buy it out and go private. It's fairly valued now if you own, you could sell, but overall the stock is okay.
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WATCH
Affinity for a product is different from investing in a stock. Don't touch until gets above $13.50. Stock seems to be pausing and could continue dropping, which would be confirmed by a drop below $12, and then you should get out. Thinly traded is a problem, as you don't want to buy a stock you can't get out of easily.
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He generally likes the spirits and liquor business. Corby is one of the leading players in Canada but there are international companies in this space. Pernod Ricard owns a controlling interest in this company and appears unwilling to pay out the cash balance in the company as a dividend or take it private or do anything else to unlock value. This is why he exited his position. He likes the company, it pays a good dividend, it runs a stable long-term business, but it doesn’t look to be generating a high enough total return at this time. On the other hand, in a market like the present one, owning a stable cash-producing business like a liquor business is not a bad idea.