Jim Cramer’s Charitable Trust starts Constellation Brands position to diversify beyond AI-linked holdings

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Cramer adds Constellation Brands

Highlights

Jim Cramer’s Charitable Trust initiated a Constellation Brands position, buying 270 shares to reduce AI-linked stock concentration and diversify the portfolio.
Constellation Brands beat quarterly expectations with net sales up 6% year over year and adjusted EPS of $3.74 versus the $3.56 consensus, gaining beer category market share despite soft industry growth.
Constellation Brands agreed to acquire SpikedAde for $75 million upfront plus up to $278 million in contingent consideration, targeting the ready-to-drink segment and setting a $165 price target for the stock.

Portfolio shift and valuation case

As reported by CNBC Investing, the trust is buying 270 shares of Constellation Brands at roughly $xx, making the holding about 1% of the portfolio after the trade. The purchase centers on a company known for Modelo, Corona and Pacifico, and fits a broader effort to reduce concentration in stocks linked to the AI and data center investment cycle.

Constellation Brands trades at about 12 times next 12-month earnings-per-share estimates, offers a dividend yield near 3% and still generates enough cash flow to support share repurchases. The trust says those traits make the stock attractive as a defensive addition with ongoing capital returns.

The company reported better-than-feared quarterly results last month, with net sales up 6% year over year and adjusted earnings per share of $3.74, ahead of the $3.56 consensus estimate. Although beer category growth remains soft as GLP-1 drugs and healthier consumer habits weigh on alcohol demand, Constellation is still taking market share, with shipments rising 5.5%.

Brand performance is mixed on a depletion basis, with Modelo Especial down 2% and Corona Extra down 5%, partly offset by Pacifico up 19%, Victoria up 15% and Modelo Chelada up 5%. In wine and spirits, a smaller business after last year’s divestment of mainstream wine brands, net sales grew 17% year over year and the division posted a small operating profit.

Growth drivers and potential market tailwinds

Shares initially fell more than 7% after Constellation’s October earnings release because the company left its full-year outlook unchanged despite beating expectations. The stock later recovered after CEO Nick Fink said on the earnings call that if favorable September trends continue, the company expects to finish at the high end of its annual range.

Recent NielsenIQ data point to improving beer sales momentum, with Constellation’s beer sales turning positive at 0.8% growth in the four weeks ended Oct. 24, compared with a 0.2% decline in the four weeks ended Oct. 17 and a 1.7% decline in the four weeks ended Sept. 5. Alongside earnings, the company also announced a deal to acquire SpikedAde, paying $75 million up front and up to $278 million in contingent consideration over five years, strengthening its position in the ready-to-drink segment while limiting downside if performance targets are missed.

The trust also sees a possible policy tailwind from last week’s midterm elections, in which Democrats flipped both chambers of Congress and won several key gubernatorial races. Because Hispanic consumers account for about 40% of Constellation’s beer business, any easing of immigration policies could help spending and social gatherings among a core customer base that has been pressured by the Trump administration’s immigration crackdown.

The new position carries a $165 price target, which the trust says equals a little less than 14 times calendar year 2027 FactSet earnings-per-share estimates.

Earlier, we reported that only about 35% of planned U.S. data center projects are considered credible amid financing and power constraints.

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