Constellation Brands is the perfect example of why it pays off to be a patient investor…

As we suffer yet another painful downturn in the cannabis market, I want to share with you the tremendous value investors receive when they are patient with a successful endeavor.

The company I’m about to talk about should be familiar to the members of our various publications because I’ve written about it a lot.

I’ve even called it a stock to retire on.

Constellation Brands (NYSE: STZ) is now most famous to cannabis investors as the company that put over $4 billion into Canopy Growth Corp. (NYSE: CGC) and then fired Bruce Linton.

But of course, it only had that kind of money to invest because it is a successful company in its own right. It owns Corona in the United States, it has the country’s largest portfolio of wines, and it has a highly successful lineup of spirits.

I happen to think that the controlling shareholders – the Sands Brothers – and their hand-picked CEO for Constellation Brands – Bill Newlands – are the best management team of any company in any industry in the world.

And the company’s stock performance shows it.

My point today is that the road to those stock riches was not an easy one.

I’m going to take you on a trip back to 1986 and show you how early investors in Constellation endured a world of pain before they were able to smile all the way to the bank…

The Tale of Constellation Brands

For Constellation Brands in 1986, all of the shareholders had to deal with a slumping stock price.

From July of 1986 to the end of 1989, Constellation’s share price was down.

You can see in the chart to the right that things went way down.

A person who bought at the beginning of this period watched their investment drop 70%.

But things turned around.

A few years later, investors in the company had made a lot of money.

The best returns went to the few lucky shareholders who bought at the bottom.

But investors who purchased before that downturn in 1986 were also in a very good place – their shares, which had been down 70%, were up about 150% by the end of 1994. Investors who purchased shares every few weeks or months during the downturn did even better than that.

And they didn’t depend on luck like the people who happened to get in at the bottom. They increased their returns through careful discipline and confidence in the company’s long- term value.

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It gets better.

As of earlier last week, those 1986 investors were sitting on a gain of over 10,000%.

You can’t even see the decline in this chart; it is too small to register compared to the massive gains the company has made since.

And those investors now receive an annual dividend of more than their initial investment.

Adjusted for splits, those 1985 investors paid under $2 per share, and every year they receive $3 per share in cash.

That’s what I mean when I talk about a retirement stock.

There are stocks that you put your wealth into so you don’t have to worry too much about your retirement nest egg. That’s Constellation Brands right now, and many cannabis companies will fit that bill in the future.

You will eventually see cannabis companies paying dividends because of their massive cash flows.

The Final Chart

I’ve got one final chart for you today.

This one is called a “Percent off High” chart. It shows the maximum decline from a high in a stock’s price.

This chart is a little harder to understand if you’ve never seen one.

The line never goes above 0% because that would represent a new high in the stock – and this chart only records declines.

The line shows how far down the stock came from its previous high. As you can see, Constellation’s stock price declined by more than 50% three times during its run to 10,000%, including that huge loss early on that we just addressed.

But look at the stock since it first declared a regular dividend in 2015.

It saw a decline – all stocks decline at some point – but the decline was nowhere near as large as prior ones. A stable and growing dividend has a way of moderating stock price movements, particularly to the downside.

The exercise we just did for Constellation is a multi-year preview of many cannabis stocks.

Some cannabis stocks will sell out to others over time.

Others won’t be up to the challenge and will have to be sold.

But a few will end up on a trajectory just like that of Constellation – some very painful times will turn into fantastically successful investments.

The key is patience.

Greg Miller

Executive Director, National Institute for Cannabis Investors

P.S. It’s true that stocks can take time to yield returns. But we recently met with my good friend, Tom Gentile, who shared a little-known cannabis investment strategy for some quick turnarounds in the meantime. In fact, his first trade for Cannabis Power Trader members yielded a 73% gain in under a month. And it’s all down to his state-of-the-art pattern-spotting system. See how it works and how you could see double- or triple-digit returns in just weeks – or less.


17 responses to “These 4 Charts Show Why It’s Important to Be a Patient Investor”

  1. Something off the subject here. What is meant by ‘a share’ or ‘a half share’ when recommending a company for investment? Is there a set amount you consider a ‘share’ to be?

  2. Growing sales. Growing earnings. Growing dividends. Such stocks mean growing money.
    BUT, many stocks never get there.

  3. Greg, Thank you for calming my fears as I am a new investor and ever since I began investing this past April it has been bleak! I actually bought more shares if Canopy Growth when the price plummeted but Constellation is just so expensive I would only be able to buy one or two shares at a time. Is that worth it? Please let me know. Thanks!

  4. What is happening with IIPR? I know they have offered out stock to raise more capital and that an investor sold a huge amount. Is there anything else to report? Should I wait to jump in on more shares?

  5. Thank You,Greg..
    I really appreciate your vote of confidence in this stock,I bought it 6 months ago and as of this date lost half the value! But,it was a long term investment not for me but probably 10-15 years down the road for the grandchildren. Keeping tabs on your portfolio is one thing but the day to day decline with this stock was nerve racking to say the least. THANKS S AGAIN.

  6. Thank you Greg! For the reassurance of a cannabis stock I bought a canopy growth and I’ve seen it go down 50% it’s a bit nerve racking but I will be patient and maybe even buy more now thank you again ..

  7. I have to admit, watching my investment in Canopy Growth feels like someone backed up a vacuum truck to my portfolio and turned it on High. But it’s too late to back out now, and I truly believe cannabis will be federally legalized sooner rather than later. Public opinion supports it (even here in ultra conservative Texas). I’m reminded of Apple in the early 80s. Their computers seemed like toys, and only school systems would buy them; they nearly went out of business if I remember correctly. But look at Apple now. If only I’d bought shares then, right?

  8. One important factor is never addressed in these forums-the rampant manipulation and shorting of cannabis stocks, especially those on Canadian exchanges, which do not regulate shorting. I’ve been “investing” for almost 2 years and it is getting very discouraging. The people making money are trading, not investing.

  9. I’ve sold off some real dogs but am hanging in there for the long run. It has to get better folks. Legalization is just around the corner. Greg says so!

  10. It seems to me that until things are more stabilized, it won’t be a good time for investing, only trading. That is a good thing, actually, because eventually markets will adjust to changes and THEN start to grow and establish a much more solid environment. We need these changes, big time. Maybe I should say, ‘Bigly’. We need updated changes in our cultures, our markets, even our definition as a nation. We need this and every change brings about the little cra cra that, in effect, separates the Big girls, from the girls, and Men from the boys. I love it, almost as much as football.

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