Constellation Brands Inc (STZ-N)

They report Wednesday. They can't be sure of the impact of tariffs on their products like Mexican beer. They already are challenged by the weight-loss drugs and the health trend. He suspects the immigration crackdown has hurt, because some of their customers are Hispanic.

Big selloff in January, with a lower low in February. Now trying to establish a higher low in March. If it can hold $175, this is a reverse head and shoulders pattern. Looks like a pretty strong technical base forming; for confirmation, need it to break out ~$185-190 to complete the base. If it does, really interesting. RSI still fairly weak.

Down 19% last month, but was already under pressure after the election and a bad quarter. The CEO lacks urgency is fixing the company's problems. Seems to be in denial. With the new Mexico tariffs, he sold half his position today.

Yesterday, LVMH reported a 36% decline in wine and spirits. That is shocking for the entire alcohol sector, and LVMH is the best performer. STZ is -27% in the past year. No alcohol stock is willing to admit to an existential threat, but rather than drinking is normalizing after Covid. He disagrees. Cannabis is cheaper than alcohol, there's a new advisory that links alcohol to increased risk of cancer, younger people are drinking less, and the weight-loss drugs are limited alcohol cravings. What could turn this around is offering something new, like new drinks and better prices (stop increasing prices). 

Today they reported weak numbers, missing on almost every line and cut their full-year sales forecast.

It's been up and down and down. It faces headwinds from the weight-loss drugs reduing consumption of alcohol, potential tariffs on Mexican goods (Modelo is a major brand of theirs), and Latinos, a key consumer, could be deported under Trump. But STZ spews cash and is growing, leading to Trump exempting STZ from tariffs. He just added more shares. He wants STZ to talk about this big brewery they're building in Mexico. He hopes they launch a huge share buyback. This is tricky.

It rallied 3% today, perhaps by a market sensing that Harris will win the election. STZ sells many beers that are popular with Latinos, and immigration will be more liberal under Harris. STZ's beers are made in Mexico, so it could be hit by a Trump tariff. 

He doesn't think a recession is around the corner, would pick names for continued mid-cycle economic growth. This name doesn't have as much growth as others, but earnings are reliable.

80% of revenue from Mexican beer imports like Corona and Modelo. Relative to industry, has done well. Wine and spirits side hasn't performed as well as management had wanted. Risky, expects it to underperform index. 

Stock has been sinking for months and faces concerns of the eight-loss drugs impacted their beer sales.

Last week, it reported stellar numbers but shares still fell, a victim to persistent misconceptions. Their Modelo is the #1 beer in the US and is gaining market share. Pacifico sales are up 21%. STZ operating margins were up 260 basis points. They beat Q1 EPS. Shares should be selling at $300. The problem is STZ also sells hard liquor, which Wall Street has given up on as well as doubts that beer's popularity is waning. Has huge free cash flow, are buying back shares, and is expanding facilities. Other threats are the weight-loss drugs and the popularity of cannabis. He won't abandon this stock though.

Leading wine, beer, and spirits. Safe choice. Favourable consumer trends, including moving towards premium offerings. Strong cashflow, will continue buybacks. 11% growth rate. Down 10% from recent highs, chance to buy. Yield is 1.6%, recently raised by 13%.

Was upgraded today. Likes it long term given its dividend growth. They did a great job in 2023 during the Bud Light debacle by growing market share, led by Modelo beer. is well-run.

They report Thursday. They sell the top-selling beer in the US, Modelo. Should report a good quarter. Beer sales have been strong and their flow is flow is good, but STZ needs to pay down debt.

The drug impacts hard liquor, not beer. Doesn't know why. He's watching this.