TWO SOLID HITS AND A WHIFF

Like most investors, I've spent the last several months vacillating between euphoria and despair. A self proclaimed smart investor descends into stupidity. Over and over again.

Of late, I've been encouraged by the performance of a couple of my holdings. Proof that a value investment approach can work over time. Markets will dive and confidence will sag, but some stocks will go up. I'm not discounting luck as a reason.

My last two posts, Smart Balance [SMBL] and Constellation Brands [STZ] are the holdings that have helped hold my net worth together during the market's flight away from commodities, Europe exposure, and other out of favor sectors. Since the first part of April, SMBL is up more than 70% and STZ has risen  over 45%. Both of these companies have good management and operating performance has been OK, but acquisitions have enlivened analysts and investors.

Mario Gabelli jumped on board Smart Balance and bought 5% of the company. He, and others, liked SMBL's acquisition of two gluten free product companies. The party at STZ didn't start when they owned Robert Modavi and a host of wine and spirit names plus 1/2 of Mexico's Modelo American distribution. But it sure started when they announced the purchase of the other half of Modelo's U.S. distribution. The financing is in place, but the final capital structure of the $1.5 billion deal isn't known. I'm sticking with SMBL longer term and may bail after awhile on STZ.

Now the whiff. I've written about Teva before stating that it is under valued and should produce good returns. When? It continues to act like a dead worm in the swimming pool out back; it just keeps sinking. I'm hopeful it has hit bottom and is resting at its low point. The same mindset that hated SMBL and STZ is at play with TEVA. It's hated for patent expirations, litigation, and who knows what else. Those concerns a overblown. Analysts are calling for $5.40 eps in 2012 and $5.80 in 2013. As a $39 stock the P/E is about 7X. Even as a "slow grower" it's worth more than 7X as the balance sheet is decent.

It's only a matter of time with TEVA and you get a 2% yield while waiting. Something will spark the investing community, maybe an acquisition like the other two companies or some break through drug or blockbuster generic opportunity, but it will happen and the upside is significant. I've been saying that for quite awhile, but I remain a believer.

Robert Mondavi Just Went On Sale

The past several days have been grim market days. No QE3 forthcoming and traders are beside themselves, driving the markets lower. One of the few green arrows during that time span has been Constellation Brands [STZ]. The catalyst for STZ's rise was Goldman's new Buy rating from Neutral. I don't know what specifically convinced Goldman to increase their enthusiasm level, but I'm glad they are on board and am comforted.

This morning STZ reported results that didn't lift Wall Street's spirits even though spirits are their business. They make Robert Mondavi and a host of other wine brands, several well know vodkas and whiskeys, and import Modelo and Corona beer. That mixture didn't produce the intoxicating results that some traders were looking for and the stock is off 13%, about $3. That's as good as finding a coupon in the newspaper that I can take to Publix. So I bought some.

While net was off expectedly from last year, the adjusted eps for the quarter beat analysts guestimates by a ton. Their divestitures and operational changes must be working. However, guidance was less than had been expected and that's the rub. Twenty less cents eps for this year and down you go. But the Company is still calling for eps of about $2 which is a P/E of 10-ish, not a steal, but reasonable. The balance sheet is decent and they are set to buy back stock which may help stabilize the share price.

Constellation isn't a home run at these levels, but I think it will beat the market this year, and so does Goldman. This morning is a good entry point. My middle son arrives for Easter this afternoon and I'm sure the two of us will goose Constellation's revenue. If the rest of the country does likewise I'll get my 20% up swiftly. TaTa.