If there’s one cannabis stock that you can keep all the way to retirement, this is the one…
Last week, I shared the “magic formula” for looking at an earnings report. It seems a lot of you found it helpful, and I’m glad I could cut through the financial jargon and help you get straight to the point when it comes to reading an earnings report.
I told you about three things to usually watch for and three things you can usually ignore.
I used the word “usually” because the traditional rules of investing are being thrown out the window when it comes to the cannabis industry. It’s just a market that is moving faster and will be bigger than anything I’ve ever seen in my 30+ years of trading experience.
Now, here’s where it gets tricky…
There are traditional companies trying to stake their claim in an industry some project could eventually be worth $1 trillion.
That’s when some of the old metrics do start to matter.
And in this case, I’m talking about Constellation Brands (NYSE: STZ). Revenue during any quarter is important for a company this size, as well as how the stock trades after earnings. If a big company misses its earnings, investors will generally pull their money out of the stock, and the price will dip.
If a big company exceeds expectations, you get a flood of new investors and institutions.
So while those are still two important things to consider when reviewing Constellation’s earnings, it’s not the full story.
Remember – Constellation is now in the cannabis game, so we need to look at it a little differently.
And by viewing Constellation under a different lens, you’ll see why I’m so excited for the future and the profits that will start to stream in for shareholders…
The Real Story Behind Constellation Brands
As you know by now, I keep reinforcing that branding is an important part of running any successful company.
And sometimes that means going back to the drawing board, looking at what is selling and what isn’t, and cutting your losses to become more focused. That’s why Constellation is selling 30 brands from its wine and spirits portfolio to E. & J. Gallo Winery for $1.7 billion.
Now, Constellation will focus on selling high-end wine – in addition to its beer portfolio – which has more growth opportunities.
As I said back in January, I’ve been a fan of this beer and wine company for a long time. Constellation is the best at managing product brands, and it is continuously adjusting its portfolio in anticipation of changing consumer tastes.
I also told you back in January to be prepared for Constellation to start focusing on premium-priced offerings.
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Oddly enough, cannabis companies are also utilizing this strategy. Instead of trying to appeal to everyone with a mid-tier product, some cannabis firms are either offering the cheapest products or charging a premium for high-end luxury lines.
So for its core business, getting sleeker and more efficient at reaching a specific audience is good news.
And when we turn to Constellation’s investment in Canopy Growth Corp. (NYSE: CGC), things get even better.
Constellation & Cannabis
Constellation owns a 37% stake in Canopy, and I’m here to tell you that not only is Constellation Brands now a cannabis company, it’s now a cannabis company I think every investor needs in their portfolio, point blank.
Make no mistake, this is not a stock to trade.
It’s a stock to buy more and more of when your wealth increases, and when you see the stock price dip, it’s great to build an even bigger position. It currently pays a dividend of $2.96, which is a yield of 1.6%. If you enter that into a dividend reinvestment program (DRIP), then you can accumulate more shares without having to pay a dime.
And an interesting note on Constellation’s dividend – it plans to increase its payout by a penny.
Now, that may not sound exciting at first, but it shows that the company is looking ahead, and current shareholders will be thankful down the road. In order to be a “Dividend Aristocrat,” a company must have a minimum of one dividend increase annually for at least the last 25 years.
That’s what Constellation is focusing on with this move.
Being on that list carries a lot of weight with risk-averse investors, and that means even more money will flow into Constellation down the road.
Constellation just started paying a dividend in 2015, so there will be a waiting period before it hits that list. However, if you own the stock now, you’re going to look really smart in the long haul.
Also remember that, with its partnership with Canopy, Constellation now has the potential to add a new line of products to its current lineup. It has the first-mover advantage in marijuana beverages just as the market takes off.
All of which proves to me that this stock has a big future.
Executive Director, National Institute for Cannabis Investors
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19 responses to “Why This Cannabis Blue-Chip Stock Needs to Be in Your Portfolio”
April 08 2019