There are plenty investment sayings about how company management can make or break a firm’s stock returns. And in today’s world, where retail investors own a minuscule number of shares and institutions tend to trade in and out of shares, company management tends to drive control.
In many cases, letting the full-time employees devoted to the company run the show is a good thing. In other cases, such as where control is closely held by a family, the results can sometimes be a bit more mixed.
Constellation Brands (STZ) is currently closely held by the Sands family. But the company is offering to reduce the family’s voting power. Like many other family-run companies that have become massive conglomerates, there’s some disagreement at the top.
Yet as one of the world’s largest collection of spirits, breweries and wineries could still be a good value here, even if the family grip over the company weakens. The past year has seen shares trade flat, and the company has seen revenue slip 5 percent and earnings drop a staggering 63 percent.
Action to take: The opportunity for more outside control over the company could allow it to refocus on growth, delivering better returns for shareholders going forward. Trading at under 20 times forward earnings and yielding 1.3 percent, shares are still a defensive play in today’s markets, but one with more upside on a more efficiently-run business.
Traders might consider the July $240 calls. Just $10 out-of-the-money, the calls last went for about $7.00. They offer mid double-digit return if shares can continue on the current uptrend they’ve started in the last few weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.