Wall Street traders can be jittery, but a knee-jerk reaction of the markets is giving savvy investors a great chance to own even more of this cannabis pioneer.

Wall Street traders can be jittery.

Every quarter they parse companies’ earnings releases looking for any small restatement, decline in revenues, or slightly unexpected expense.

If any of those numbers miss the mark, they sell.

The result is usually a sharp decline in the company’s stock price.

But these sharp, reactive sell-offs are often temporary. For a patient, long-term investor with an eye on owning great companies, they’re opportunities to add to their holdings and build even more wealth.

Well, this giant beer brand, a company with the most substantial investment in cannabis yet, just reported slightly disappointing earnings.

And the knee-jerk reaction of the markets is giving savvy investors a great chance to own even more of this cannabis pioneer.

At least for those that can act quickly…

Sell-Off in Constellation Brands Is Great Opportunity to Increase Stake

Constellation Brands Inc. (NYSE: STZ), the owner of popular beer brands like Corona and wines like Kim Crawford and Robert Mondavi, reported a decline in third-quarter earnings from the year prior. The stock sold off more than 10% on the news and still hasn’t fully recovered its pre-earnings release price.

We first recommended Constellation to you back in October as a free pick. We recommended at the time to use any pull-back in the price to add to your position – and this is one of those times.

I started covering the company back in the ’90s, and I’ve been a fan ever since. Constellation is the best company at managing product brands I’ve ever seen, continuously adjusting its portfolio in anticipation of changing consumer tastes.

In fact, during the company’s conference call to discuss the earnings announcement, management described the changes they are making to its offering of wine brands. Wine drinkers are shifting to more premium-priced wines, so management – in typical fashion – is not hesitating to adapt.

As we speak, an unprecedented flood of cannabis IPOs is barreling towards us. We’re talking about seeing as many as 42 millionaire-making IPOs hit in the next 90 days – four could go as early as January 31. And when it happens, it could create the next round of marijuana millionaires. And we want you to have an opportunity to be one of them. Just click here to learn how you can get in on this little-understood investing phenomenon.

The company’s investment in the cannabis market is also part of that same forward-thinking spirit.

To date, no single investor has made as big a commitment to cannabis as Constellation Brands.

In November, the company closed on a $4 billion investment in Canopy Growth (NYSE: CGC, TSX: WEED), giving it a stake of about 37%. Sales of alcoholic beverages across the entire industry are not growing nearly as fast as they used to, so Constellation made the bold leap into cannabis to maintain the type of growth to which its investors have become accustomed.

I have also always loved the executive team’s relentless commitment to making decisions that are in the best interest for shareholders, and based on what they expect from their Canopy investment, long-term investors have much to gain.

Canopy Investment Will Quickly Boost Constellation Brands Stock

No doubt, $4 billion is a big commitment. Constellation had to borrow money to make the investment, and the interest expense associated with that debt was partially responsible for the earnings decline.

But it’s the massive revenue potential in cannabis that caught management’s eye in the first place.

For companies like Constellation that generate a lot of cash-flow and are laser-focused on maintaining high profit margins, they are always looking for revenue that will flow to the bottom line quickly.

When revenues grow as expected, management takes care of investors by increasing dividend payments and buying back stock.

Management stopped their stock buybacks and dividend increases when they made their investment into Canopy because of the debt required and their commitment to keeping an investment-grade debt rating. But after this quarter the company announced that it plans to return $4.5 billion to Constellation’s investors over the next three years. That’s more than double the amount which would be accounted for by the current dividend alone, so we can expect a higher dividend or renewed share buybacks.

Even with this commitment, management still expects to exercise its Canopy warrants. This will bring its ownership of Canopy above 50%. Constellation is already up on its Canopy investment and the warrants in the money. In fact, a special irony of the decline of Constellation’s stock is that the stock of their biggest investment – Canopy Growth – is up 42% in just the first two weeks of this year.

If there was ever a time to add to your position in Constellation Brands, this is it.

Thanks for being an important part of the National Institute for Cannabis Investors,

Greg Miller
Executive Director, National Institute for Cannabis Investors

P.S. You wouldn’t want to ride on an airplane where the pilot has been given the wrong coordinates. Why would you want to invest in a stock based on the wrong information? But the latter is exactly what is happening if you’re relying on information about cannabis stocks from many financial websites’ free and well-known platforms. The Institute digs deep and turns over every stone to ensure information like share counts, market caps, and what is really promised out to early investors in a company is available at your fingertips. Click here to find out how to get the real data on more than 100 of the biggest, most tradeable cannabis stocks before you invest your hard-earned money.


Comments

20 responses to “Add to This Core Cannabis Holding Now”

  1. Morning Greg how are you? I can’t afford to own any Constellation Brands stock at this time, but I do have a position in Canopy Growth!!!!

  2. Greg,

    For those who cannot afford a sufficient quantity of STZ to realize substantial earnings; would you suggest any Options that could prove substantial benefits?

  3. Hello Greg, I’ve been watching the Israeli stock InterCure. They are likely to do an IPO this year. It’s price has already skyrocketed. Do you feel it is overbought and does it still have much room for more substantial upside?
    It’s current price is out of my league at upwards of $500. What is your outlook?
    Thank You for this opportunity to ask you questions in this forum!
    Most Cordially,
    Jill Paul

  4. If one does not have any shares in Constellation, would getting in now be very profitable in the next couple of years or is it too late for that kind of expectation since the IPO occurred in October? Thanks in advance, Sal.

  5. Hi Richard,
    You could get a January 2020, $160 call for about the same price as 10 shares of STZ. This would let you control 100 shares for an entire year and provide plenty of opportunity to capture the expected appreciation.

  6. got NXGWF just before latest “jump.” +66% in 3 weeks!

    Always drop what i’m doing to read your updates. Twitter notifications very helpful.

    Thanks.

  7. Charles Freund, can you explain what you mean by your comment above about getting a January 2020? I have never bought stocks don’t have any clue but I did join here and have bought shares of 5 Cannabis stocks. I don’t know what puts and calls all mean and what they can do for you. Was wondering what your comment meant above on how you can control the stocks for a year and opportunity to capture the expected profits?

  8. Jami,
    Some option strategies allow you to profit from the directional movement of a stock, for example, without actually buying the stock, all with much less risk than had you bought the stock directly. The profit potential trading options can be far greater than trading stocks.
    Let’s say we are bullish on STZ and we think STZ is going to go up in price between now and December. STZ is currently trading at $160.05, so we could buy the STZ stock outright, buying 100 shares at $16,005.
    Options can control the same number of stock shares for far less. We could purchase the January 2020, $160 call option, which controls 100 shares, for $1.81 times 100, or $1,810. (This is a bit more than purchasing 10 shares of STZ stock, but close.)
    Options will track the price movement of the underlying stock. The option will increase in value as the price of STZ stock increases.
    Let’s assume the stock price appreciates $35 to $195 per share. 10 shares of STZ could be sold for a profit of $350.
    The call option, purchased for $1,810 is now worth $2,442, and could be sold for a profit of $632.
    As a buyer of a call to open a new position, your risk is limited to the purchase price, no matter what happens to the underlying security. Your profit potential is theoretically unlimited.
    This is a very brief overview; I could send you some additional information which is much too long to include in the reply section.

  9. Thank you. It seems it is a very good company. In our current situation we are looking for cheap cannabis companies which can fit our budget or any IPOs coming soon.

    Best
    Ahmed Emam

  10. Good Morning Greg, I am brand new at this investing stuff, is it possible to start investing with an amount of $500.00, and what would you recommend what stock to start with?

    Thanks
    Carlos

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