Trade Update $STZ

Themultiplehasgonefromunder9toaround16todayinlessthan18months?

ThemainreasonforthatistheacquisitionofCrownImports?

Asaresult,investorsrevaluedthestockbasedonexpectationsformuchbetterfutureearningsgrowth?

Analystsaremodelinginabout16%earningsgrowthincalendaryear2013,and21%for2014。

PriceAction/Technicals?

Thestockbrokeouttoall-timehighsinthemonthsfollowingtheannouncementoftheacquisitionoftherestofCrownImports?

ThatacquisitionwasadefinitivestepintothebeermarketforConstellation,whichmanyinvestorsviewedaschangingtheunderlyingvalueproposition?

Thechartsbearthatoutonthebreakout?

Hereisthe20yearmonthlychart:

STZ20yrchartfromBloomberg

Thestockhadbigvolumeinthesummermonthsof2012whenitbrokeabovethe$30area?

Sincethen,thestockhasbeenquiteboring,tradingbetween32。

5and37。

5sincelateAugust?

Giventhelong-termnatureofthebreakout,Ithink32。

5isverystrongsupport,while37。

5iscurrentresistance,butnotnecessarilystrongresistance。

Volatility?

Impliedvolisashighasthisstockseesgoingintothisearnings。

Heresalookatthepast2yearswiththerampupinIV(red)lately:

IVvsHVfromLiveVolPro

Impliedvolswilllikelysettleinthe20sfollowingearnings,somonthslikeFebandAprilwillseeamassivecrushfromtheircurrentvolsatandabove50。

MyView?

STZhashadanimpressiveruninthepastyear,up80%sinceJan2012?

Thestockhasstrongtechnicalsupportinthelow30s?

Itlooksreasonablyvaluedgivenanalystestimates,andthebusinesshasbeenrelativelyconsistent?

Myonlymainconcerncomesfromtheirmostrecentearningsrelease?

Quotingmanagementcommentaryfromthatrelease:

Forthethreemonthsended?

August?

31,2012?

(“SecondQuarter2013”),theCompany’snetsalesincreased?

1%?

comparedtothethreemonthsendedAugust?

31,2011?

(“SecondQuarter2012”),primarilyduetospiritsvolumegrowth,basebrandedwine(asdefinedbelow)volumegrowthandnetsalesofbrandedwineacquiredintheacquisitionsofRuffinoandMarkWest(bothasdefinedbelow),partiallyoffsetbyhigherpromotionalspend。

Operatingincomedecreased?

10%?

overthecomparableprioryearperiodprimarilyduetothehigherpromotionalspendandanincreaseinselling,generalandadministrativeexpenses。

The1%salesgrowthonincreasedadspendingdoesnotindicateaverystrongend-marketwineconsumer?

SowhiletheCoronacontributionislikelytobeanicebonusgoingforward,theunderlyingwinebusinessseemsweak。

Insum,Idontthinkthestockhasatonofdownsidegiventhetechnicalsetupandtheprospectsforthebeersegment,butIalsodontexpectarip-roaringbreakoutabovethe37。

5level?