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Why Constellation Brands (STZ) Stock is a Compelling Investment Case

Blue Hawk Investment Group recently released its Q2 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 14.06% for the quarter (net), underperforming its benchmark, the S&P 500 Index which returned 19.95% in the same quarter. You should check out Blue Hawk Investment Group’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash.

In the said letter, Blue Hawk highlighted a few stocks and Constellation Brands Inc. (NYSE:STZ) is one of them. Constellation Brands Inc. (NYSE:STZ) is a producer and marketer of beer, wine and spirits. Year-to-date, Constellation Brands Inc. (NYSE:STZ) stock lost 9.6% and on August 10th it had a closing price of $171.45. Here is what Blue Hawk said:

“Constellation Brands (STZ) – STZ bounced back significantly from a rough Q1 and is now up 73% from its low point in March – though still down 5% year-to-date. As we noted in last quarter’s letter, we could not find any fundamental reasons to meaningfully change our estimate of long-term value, and our decision to add to our position as it fell has so far turned out to be a good one. We believe that the market mispriced risks around the company’s exposure to restaurant and bar sales, as well as the impact of a temporary shutdown to beer production in Mexico. STZ overindexes to “off-premise” (non-bar/restaurant) sales relative to the rest of the industry, so a 75% reduction in bar/restaurant sales during the most recent quarter was nearly offset by just a 20% increase in off-premise. Modelo and Corona products continued to sell very well (aided by the recent launch of Corona Hard Seltzer), helping STZ to deliver better-than-expected results for the March-May fiscal quarter. Beer production also returned to normal levels in June before STZ suffered any notable out-of-stocks in popular products. The market has started to come back around to our view that Constellation Brands is positioned very well over the near, intermediate, and longer terms. We harvested some gains as the stock price came roaring back, but valuation remains below historical averages, and it is still a top-five holding in our portfolio (with good diversifying characteristics relative to the rest of our top positions).”

Public Domain/Pixabay

This isn’t the first time Blue Hawk talked about Constellation Brands Inc. (NYSE:STZ) favorably either. The investment firm has been a long time Constellation Brands Inc. (NYSE:STZ) bull. In April, we shared Blue Hawk’s bullish Constellation Brands Inc. (NYSE:STZ) thesis in this article.

In Q1 2020, the number of bullish hedge fund positions on Constellation Brands Inc. (NYSE:STZ) stock decreased by about 4% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with Constellation Brands’ growth potential. Our calculations showed that Constellation Brands Inc. (NYSE:STZ) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.