This Top Alcohol Stock Could Hand Us 23% In Just Over A Month

Jared Levy's picture

Friday, May 4, 2018 - 12:00am

by Jared Levy

Growing up in a state settled by conservative Quakers (Pennsylvania) with two parents who didn't drink much at all, my childhood exposure to beer and liquor was limited. As a perceptive teenager, I began to take notice of how my friends and their families drank. With the exception of a few very heavy drinkers in my large circle of acquaintances, most had one or two casual drinks once a week or less.


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As the years passed, populations grew, wealth increased and social habits shifted... greatly. Now, nearly all my friends enjoy at least one libation, beer or glass of wine a day -- if not more -- and most keep a stocked bar in their homes. I've noticed that alcohol is playing a larger role in our daily lives -- and the stigma surrounding its use has also declined.

Anecdotal as that may seem, my findings are supported by several studies. One 2017 investigation published in the journal JAMA Psychiatry, showed that the amount of drinks imbibed by the average American jumped 11% from 2002 to 2013. High-risk drinking, defined as four or more beverages per day at least once a week for women and five or more for men, increased by 30%. Other studies show similar results.

The rise in consumption, both here and abroad, could be linked to many different factors, including easier access through retail expansion and improving discretionary income.  

But I believe the biggest contributors to rising alcohol consumption are mainly the result of rampant marketing mixed with increasingly stressed out people dealing with a society that's fast moving, plugged in, superficial and highly visible. Sometimes, it just seems easier to have a drink and forget.

And the thing about alcohol is that it's legal and acceptable in most scenarios.

To some people, some of this may seem negative, but it's the reality we live in. The question is whether you choose to deny it... or choose to profit from it.

That's where this week's trade target comes in.

A Top-Shelf Company
Constellation Brands (NYSE: STZ) is one of the top alcoholic beverage companies in the United States, selling more than 100 brands of beer, wine and liquor from its roughly 40 wineries, breweries and distilleries. The company represents many of our favorite brands, from Mark West and Kim Crawford wines... beers like Corona, Modelo and Pacifico, as well as craft brewer Ballast Point... and spirits including Svedka Vodka and Casa Noble tequila.

Constellation focuses on the upper-middle- and upper-class consumer, who not only has the disposable income to drink but tends to be less affected by economic slowdowns. STZ is also investing in Canopy Growth, the largest publicly traded cannabis supplier in the world, in an effort to capture profits on that growing industry.

The company's strategy seems to be working. On March 29, Constellation reported its earnings per share (EPS) from fiscal year 2018 (ended Feb. 28) were up by nearly 30% compared to fiscal 2017, marking its fifth consecutive year of EPS growth over 20%.

While the broader beer market remained stagnant in 2017, Constellation's beer business continued to thrive, hitting 31 consecutive quarters of growth. It's now the largest seller of imported beers in the United States, and accounts for the third-largest market share of all major beer suppliers.

These facts and others are prompting analysts to get increasingly bullish on shares. Of the 23 analysts who cover STZ, 17 rate it a "buy," and the other six rate it a "hold." And looking at the targets set by analysts, nearly everyone agrees shares should be valued above their current prices around $227.

The consensus sees shares moving above $252 per share.

My thesis is that STZ will continue to win, capitalizing on our growing dependency for alcohol and continued improvements in major global economies.

Today's trade also takes advantage of some good market timing. Recently, shares experienced a dip down to the lower boundaries of the bullish trend that's been intact since February, which will provide a good entry price for us. With good fundamentals and solid technicals in its corner, I believe the stock should be able to reclaim the $231 level, which was STZ's high just after its earnings beat on March 29.

Now, that would be a respectable gain of 1.7% from current levels -- not terrible for a month. But using call options, we can leverage the stock's move into a much larger gain than we'd get from simply buying shares.

If the stock hits $231, we can potentially capture a 23.1% gain by mid-June expiration. That's 168.5% annualized.

Sounds crazy right? It isn't -- Wall Street uses the same strategy every day. If this still sounds risky to you, maybe because you're new to options trading, know that this trade breaks even if STZ hits $228. That's just about 0.6% above recent prices, a move easily supported by this company's rosy outlook.

How You Can Get In On This Trade
It wouldn't be fair to my premium Profit Amplifier subscribers to reveal the specifics of this options trade in this article. But my proven strategy could be just what you need to make more on your trades than you thought possible.

While the rest of the crowd is simply buying stocks and hoping for the best, my subscribers and I have spent years "raiding" the market with our simple options trades, taking more than our fair share of gains.

I'm talking about returns of 31%, 35%, and more -- all in a matter of weeks rather than months or years. And sometimes our trades work even faster. In fact, we just closed a trade on Southwest Airlines (NYSE: LUV) for 20.7% in just 2 days.

Bottom line, my stock market raiding technique is the best way to increase your returns while preserving capital and reducing risk. Of course, that's only if it's done correctly.

That's why I created a special report that will walk you through the steps I take when going on market raids, which should help you avoid the costly mistakes many new traders experience. If you'd like to make trades like the one I described today -- or even potentially make 80% when a stock only moves 8% -- go here.

Jared Levy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.