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Toasting an UnTapped Opportunity

07/11/2003 12:00 am EST


Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

Undervalued, under-appreciated, and under-followed are some of the characteristics that Nancy Zambell looks for when analyzing stocks. She prefers to be in a stock before it gains widespread attention and rises to levels that reflect this popularity. For the latest buy in her UnTapped Opportunities she picks the leading producer of wine.

"Constellation Brands (STZ NYSE) is the largest multi-category supplier of beverage alcohol in the US Beer, wine, spirits, you name it. Formerly Canandaigua Brands (changed in 2001), the company produces and distributes $2.7 billion of the world's leading beverage brands, sold through one of the world's biggest network of vendors.

"The company is in the right place at the right time. When it incorporated in 1991, it rang up sales of $200 million and netted $0.62 a share. For fiscal 2003, net sales rose 5% to $2.73 billion. Net income rose 47% to $2.19 a share. That's some healthy growth. Demand for wine has grown since 1991 in part due to reports that moderate wine consumption has cardiovascular health benefits. These studies continue to day. Recent research found that certain antioxidants in wine also help in the prevention of ulcers, cancer, strokes, and heart disease. Since 1998, total US wine consumption has risen 10% per year.

"The company has proven that even during economic downturns, a keen focus on a strong balance sheet with lots of cash and reasonable debt provides plenty of opportunities to leapfrog ahead of its peers. Since 1991, Constellation has made 12 acquisitions. But the latest purchase tops them all. The company acquired BRL Hardy, the leading producer and exporter of wine from Australia and New Zealand. The acquisition propels Constellation's sales past the $3 billion mark for the first time and moves the company to the #1 wine producer in the world. Buy up to $32.50 and keep a mental sell limit at $25."

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