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Bill Nygren Comments on Constellation Brands

- By Holly LaFon

Constellation Brands (NYSE:STZ) is the top imported beer company in the U.S. and one of the world's leading wine producers. We believe that the company's valuation is compelling due to its robust long-term growth outlook of its strong brands within both beer and wine. Over the past five years, Constellation's beer segment -- which includes brands such as Corona, Modelo and Pacifico, among others -- has grown its sales volume and revenue at a 10% and 12% CAGR, respectively. The company was able to accomplish this impressive growth during a period when industry volume growth remained relatively flat. Despite a market-leading medium-term growth outlook that calls for high single-digit revenue growth within its beer segment and low-to-mid single-digit growth within its wine and spirits portfolio, Constellation trades at a meaningful discount to other consumer packaged goods companies that are experiencing slow to no growth. In addition to its portfolio of brands within beer, wine and spirits, the company has established a strategic partnership and large ownership stake in the world's largest publicly traded cannabis company, Canopy Growth Group. We believe this partnership positions Constellation to potentially become one of the bigger beneficiaries in a category that some project could exceed $200 billion in global demand over the next 10 to 15 years. On our one-year forward earnings estimate, Constellation trades in line with the earnings multiple for the overall market without giving the company any value for its significant stake in Canopy. We believe this presents an opportunity to invest in an above-average business at just an average price.

From Bill Nygren (Trades, Portfolio)'s first-quarter 2019 Oakmark Fund shareholder letter.
This article first appeared on GuruFocus.