I first started following Constellation Brands Inc. (NYSE: STZ) over 30 years ago, long before it ballooned into the $40 billion giant we know today.
Back then, they were a much smaller and much different company.
In 1992, the company was called Canandaigua Wine Company, and it did a little less than $245 million in net sales per year.
At the time, Corona Beer’s growth story was just getting underway, and Canandaigua only had rights to it in about half of the United States.
Richard Sands was just taking over the business from his father, who founded the company. His brother Robert was rising through the ranks and would eventually join Richard in the executive suite.
Together, the Sands brothers envisioned a much larger company than the one their father built from scratch in 1945.
Fast forward to today, and this 70-year-old New York-based company has worldwide operations, roughly 40 facilities, and over 9,000 employees.
It’s a Fortune 500 company with a reported $7.33 billion in revenue, and more than $18.6 billion in assets, and is the industry giant behind brands like Robert Mondavi, Corona Beer, Svedka Vodka, and Black Velvet Whisky.
And today, I’m going to show you why I think this blue-chip stock is the one cannabis play every investor needs in their portfolio.
One of the Best Marijuana Stocks You Can Own
Over the years, Constellation has continued to impress me, and for a variety of reasons.
Along the way, the company told investors exactly what they were doing and why.
They set a level of debt relative to the company’s profitability and kept to it.
They shared industry information so that investors could see why their plans made sense.
And when they made a mistake, they quickly fixed the problem.
The Sands brothers are, in my opinion, the best corporate managers of any company in any industry in the world.
And the market agrees.
Since the end of Constellation’s 1992 fiscal year, its stock has outperformed the S&P 500 by over 20 times.
It has made investors more money over that time than Intel Corp. (NASDAQ: INTC) or Microsoft Corp. (NASDAQ: MSFT), and almost as much as Apple Inc. (NASDAQ: AAPL).
And it did it without the massive market growth those companies had to help them along the way.
So when the Sands brothers decided to get involved in the cannabis industry, that put to rest any doubts I might have had about the industry.
When they put an incredible $4 billion into the industry, that sealed it…
Constellation’s Game-Changing Cannabis Move
On August 15, Constellation Brands made the biggest splash in cannabis history after making a $4 billion investment in Canopy Growth Corp. (NYSE: CGC), a premier cannabis grower and distributor based in Ontario, Canada – claiming a 38% stake in the company in the process.
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While that influx of capital instantly became the largest single- investment ever made in the cannabis market and equipped Canopy to be the “King of Cannabis” in Canada and around the world, it’s important to note that this wasn’t Constellation’s first stab at the cannabis market, or Canopy Growth, however.
In October 2017, Constellation decided it was time to get involved in the legal cannabis market and bought a 9.9% stake in Canopy for roughly $191 million.
At the time, it was the first move by a Fortune 500 company or a major alcoholic beverage maker to own a stake in a cannabis business.
As part of the deal, Constellation can acquire as much as a 50% stake in Canopy over the next three years, should it exercise all available warrants. Constellation also has the opportunity to nominate four directors to Canopy’s board, which is comprised of just seven members, thereby having a controlling interest.
And yet, when people talk about investing in cannabis companies, they still tend to generally ignore Constellation’s stock.
Here’s why that is a mistake.
What’s Next for This Blue-Chip Cannabis Stock
Related: Pot is going mainstream… These HUGE companies are buying up little tiny pot stocks… These 5 are next
When it comes to this stock, I have no doubt of three things.
First, over time Constellation Brands will take full operational control of Canopy Growth and assume ownership of it.
Second, the Sands brothers have now once again gotten in front of a major trend and beat their competitors to the market.
Third, their competitors are going to follow suit.
That’s why I’m here to tell you that not only is Constellation Brands now a cannabis company, it’s now a cannabis company I think every investor needs in their portfolio, point blank.
Make no mistake, this is not a stock to trade.
It’s a stock to buy more and more of when your wealth increases, and when the inevitable share-price declines occur with an eye toward living off its dividends when you retire.
Constellation now has the assets and logistical wherewithal to become the biggest name in the marijuana market, one that will
continue to grow at high rates going forward regardless of whether or not the U.S. legalizes the product.
It’s a stable business, worth more than $7.5 billion in sales per year. It has a fixed infrastructure and multiple business relationships to leverage.
It’s true that Constellation shares fell a bit after the most recent earnings report. The major contributor to an earnings season some termed disappointing was a big jump in spending for marketing and for increasing production capacity in Mexico.
Well, marketing and growing capacity for popular brands is a good reason to spend cash, so it’s important to not fall in the mainstream gossip-chain surrounding this one.
There’s also one more thing…
Remember that, with its partnership with Canopy, Constellation now has the potential to add a new line of products to its current lineup. It has the first-mover advantage in marijuana beverages just as the market takes off.
All of which proves to me that this stock has a big future in the next growing business: cannabis.