Constellation Brands, Inc. (STZ), Diageo plc (ADR) (DEO), Brown-Forman Corporation (BF.A): Raise Your Glass to These Wine Stocks

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Here in Silicon Valley, many a glass of Cabernet is raised to toast a business deal, a wedding, or simply the gathering of old friends.  Many Silicon Valley “veterans” retire up North to repeat their success in the growing wine industry, creating a whole new influx of money, talent, and ideas.

The wine craze shows no signs of stopping, but unfortunately there are only a few publicly traded wineries in North America to choose from.  Another way to invest in wine (and the safer way to go) is to choose the larger, more secure beverage companies that have significant holdings in major wineries, three of which are detailed below.

Constellation Brands

Constellation Brands, Inc. (NYSE:STZ)

Although Constellation Brands, Inc. (NYSE:STZ) doesn’t represent a “pure” wine investment (it is a wine, beer, and spirits company), it does give the wine-savvy investor the opportunity to invest in Napa Valley wines. Constellation Brands, Inc. (NYSE:STZ)’s brand portfolio includes some Napa valley labels that are household names in SIlicon Valley – such as Robert Mondavi, Clos du Bois, Blackstone, Estancia, and Ravenswood.  This company appears to be a mixed bag in the eyes of investors as it has a CAPS rating of 3, and Fools and analysts alike either love it or hate it.  Given the huge brand portfolio, the popularity of its premium wine brands such as Ravenswood, Robert Mondavi, and Clos du Bois (my very favorite Merlot label), and great cash flow numbers (245.7M change in cash annually, announced at the last year end period, it has my vote. Those who hate it cite top-heavy management and slower growth rates than the valuation might indicate.  During the last earnings announcement, the CEO mentioned some higher grape costs creating margin pressure (margins are now around 50% total, quite respectable for a beverage company), but stated that his strategy will be to increase market share for the premium wine brands.  I’ll drink to that!

Diageo

Beverage giant Diageo plc (ADR) (NYSE:DEO) is best known as the company behind Bailey’s; it is a little known secret that it also owns Beaulieu VIneyards and Sterling Vineyards through its UDV Guinness subsidiary. Both brands are premium and well-distributed to higher end grocery stores and restaurants, at least throughout the West. Diageo as a whole is highly diversified within the alcoholic beverage field, and owns such well known brands as Guinness, Smirnoffs, J&B, and Tanquerey.  A British company, Diageo plc (ADR) (NYSE:DEOis traded in 180 countries – with primary volume coming from the US New York Stock Exchange and the London Stock Exchange.

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