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Good morning Mike,

Could you please create a chart for Constellation Brands (STZ)?

Thank you,

- Jeff
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Could you please create a chart for Constellation Brands (STZ)?

Done -- http://invest.kleinnet.com/bmw1/special/STZ.html

My goodness, what's going on there?

-Mike
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Thank you. :)

STZ missed expectations in January, and announced an upcoming miss and lowered guidance on March 1.

They have had issues with an Austrailian excess of wine grapes, which has given them trouble in the UK wine market. They also had some extra costs related to integrating new acquisitions. Neither seems like a huge problem, as the grape glut will eventually go away, and they are
generally very good with acquisitions.

Also, US distributors lowered inventories, although they expect the effects from that to be gone by mid-year.

FY2008 (which began March 1) earnings are expected to be somewhere between stagnant and down a bit.

STZ looks to have decent long term prospects, but the next year is not expected to be good.


In their own words;

http://sev.prnewswire.com/food-beverages/20070301/NYTH00601032007-1.html

"Absent the U.K. situation and our decision to reduce U.S. wine inventories at distributors, our core branded beverage alcohol business is expected to perform well," said [CEO Richard] Sands. "We are confident in our U.S. and Canadian branded wine businesses as we continue to see consumers trading up, and we are very enthusiastic about the potential from our Crown Imports beer joint venture and our premium spirits growth platform that will be further energized by our SVEDKA Vodka acquisition. Additionally, we are encouraged by our near-term new product development efforts, increased marketing support for key brands and our previously announced U.K. facilities realignment. These elements of our business are consistent with our focus on achieving long-term growth goals and increasing shareholder value as the company continues to evolve to satisfy beverage alcohol marketplace needs through strengthening our brands, improving efficiencies, diversifying our route-to-market and establishing, or expanding, our presence in numerous European markets."

...

"We recognize fiscal 2008 poses some challenges in our business environment, yet I believe we are making the right decisions, and taking the correct actions, to strengthen Constellation's position for the future," said Sands. "We have built a great business, and we are confident in our ability to generate high-single-digit to low-teen diluted earnings per share growth over the medium-term to long-term, using fiscal 2007 as the base. This reflects the one-time impact of the distributor inventory reduction in fiscal 2008 and the anticipated longer term recovery in the U.K. marketplace. We plan to continue creating value by executing our strategy and capitalizing on beverage alcohol opportunities across categories and geographies. Constellation's business is sound, our mission is clear and our resolve is firm. Looking toward the horizon, we believe the future of Constellation Brands is strong and bright."<i/>

- Jeff
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What's interesting is how quickly it recovered from the 2001 meltdown and continued on its merry way upward. No doubt losses from the bubble turned many to drink.

I'm interested in this one. Perhaps another elastic return to the average CAGR?

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I'm not sure what that quick downward spike is in early 2001 on the chart. I think it is a something odd with the data; I don't see it looking at Yahoo, Morningstar, or Bigcharts.

- Jeff
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What's interesting is how quickly it recovered from the 2001 meltdown and continued on its merry way upward. No doubt losses from the bubble turned many to drink.

GrahamInv


Humm- Maybe there is a pattern here with beer and spirits. I was thinking the same thing a few days ago looking at:

http://invest.kleinnet.com/bmw1/stats20/BUD.html.

Notice how the stock price is depressed during the bubble, when the market is exuberant? Then, the BUD price is exuberant in 2000-2002, when the stock market is depressed. After that, it starts a decline as the market recovers!

Ed
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I'm not sure what that quick downward spike is in early 2001 on the chart. I think it is a something odd with the data; I don't see it looking at Yahoo, Morningstar, or Bigcharts.

I think you are right there. Another thing we have to expect with Yahoo! data.


2-May-01 66.95 67.05 64.50 65.35 184,800 8.17
1-May-01 65.45 67.00 65.45 66.87 240,000 8.36
30-Apr-01 32.95 32.97 32.55 32.62 276,400 4.08
27-Apr-01 65.05 66.10 65.05 65.70 181,600 8.21
26-Apr-01 64.25 66.25 64.25 65.00 261,600 8.12
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Oh my, a split and reverse split the next day?

I'll tell you that I have seen an unusual share of problems with Yahoo's historical prices. Phantom dividend adjustments was another thing I have noticed in the past -- the stock price suddenly took a dive one day (when tracing the price backwards from today) as if a dividend had been paid, but... no dividend, no split, and the unadjusted price didn't show the same drop either.

-Mike
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Here is some reading material about Constellation Brands. BTW, the analysts were right about the direction of the share price but not nearly pessimistic enough:

Jan 4

Foolish Forecast: Stars Aligning for Constellation Brands
http://www.fool.com/investing/value/2007/01/03/foolish-forecast-stars-aligning-for-constellation-.aspx?source=eptyholnk303100&logvisit=y&npu=y


Jan 5

Investors Shun Constellation
http://www.forbes.com/2007/01/04/constellation-brands-update-markets-equity-cx_jl_0104markets17.html?partner=yahootix

Constellation Brands: Not So Stellar
http://biz.yahoo.com/bizwk/070105/pi20070104693321.html?.v=1

A Second Look: Constellation Brands
http://biz.yahoo.com/ap/070105/constellation_second_look.html?.v=1

Clouds Over Constellation
http://www.fool.com/investing/general/2007/01/05/clouds-over-constellation.aspx?source=eptyholnk303100&logvisit=y&npu=y


Mar 2

A Second Look: Constellation Brands
http://biz.yahoo.com/ap/070302/constellation_brands_second_look.html?.v=1


S&P has it as a 4 star buy!

This is a show stopper for me:

STZ is a large-cap company in an industry that
has demonstrated stable revenue streams. This is
only partially offset by our corporate governance
concerns relating to STZ's dual class stock
structure with unequal voting rights.


And the P/E ratio is still high by historic standards

Year Ended Feb. 28 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

P/E Ratio:High 28 22 18 15 11 15 15 17 20 23
P/E Ratio:Low 11 8 11 10 8 8 10 11 12 16


Denny Schlesinger
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I started out thinking the dividend should be taken into account, as it more truly represents the compound annual return on a stock. On the other hand you could argue that the stock price also represents the value of the dividend vs. the risk free return. For example, in high interest times, high dividend stock prices will be driven down and vice versa. A high interest rate period might drive a interest sensitive stock down below its -2 RMS. We would then buy it and as interest rates return to normal the stock price will return to its mean.

I guess the question is do we care, other than the fundamentals of the business itself, what market factors drive the stock price up and down? Certainly most folks ignore the tech bubble as an anomaly. Using the BMW method we probably would of sold the overvalued stocks in this period, and bought the beaten down, out of favor stocks. This is the behavior we are looking for.

I've been viewing the BMW method as "A" mechanism to identify over and undervalued stocks relative to their long term fundamentals. As I am relatively new to the method, this may be an overly simplistic view.

In writing this post I've just convinced myself that the charts don't need to take into account dividends. I don't care what market forces have driven the stocks price up and down, I just want a method to determine if its under or overvalued relative to its fundamentals. And then before I buy, I (personally) want to make sure its fundamentals have not changed.

FWIW. Tom
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I'm sorry, I posted this on the wrong thead.
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I have always debated whether it is more intuitive to look at PEG rather than P/E. I remember this being one of the basic things "taught" at TMF. Anyway, I don't know how to get the historical values for P/E or PEG. Compared to DEO and BFB, currently the P/E and PEG ratios favor STZ.

-ab
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One way to get at least 10 years of earnings growth and PE is Big charts:
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=stz&time=8&freq=1

Another place to look is here:
http://ogres-crypt.com/php/chart-mscf.php?s=stz

Sandy
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