Constellation Brands (STZ)


This maker of wines (Mondavi, Clos du Bois, Ravenswood), beer (Corona, Modelo and TsingTao) and spirits (Svedka, Black Velvet and Paul Masson) gets 89% of its revenues from the U.S. and 11% from Canada, so the strong dollar isn’t hurting. It grew revenues 24% and earnings 37% last year, it’s moving into China, and has acquired partial ownership of bottle-making plants, so it has real positive momentum.

But, being the last strong stock in a group that has run out of gas is not a particularly good thing. Odds are it’s only a matter of time before STZ succumbs, too. Its high leverage could be painful, and the tiny 0.3% dividend isn’t big enough to tie anyone to the stock.

So, I wouldn’t buy STZ here—but if I owned it, I wouldn’t sell it. I’d ride this horse until it stopped running.

And in the meantime, I’d keep an eye on the company’s fiscal first quarter earnings, which will be reported on Wednesday July 1 before the market opens.

Note: Some industry pools simply aren’t worth fishing in, no matter how much you like their products. To improve your odds, the best course is to target industries where business momentum is positive (like the surveillance video industry today, or network security) and then buy the strongest stock in that industry.

That’s pretty much what Mike Cintolo does every week in Cabot Top Ten Trader, where he tells his readers not only what to buy, but what price to pay, and when to sell, too!