We're adding a consumer stock to diversify beyond the volatile AI trade

We're initiating a position in Constellation Brands , buying 270 shares at roughly $145 each. Following Monday's trade, Jim Cramer's Charitable Trust will own roughly 270 shares of STZ, representing 1% of the portfolio. As discussed at Monday's Morning Meeting, we are taking a stake in the company best known for popular Mexican beer brands Modelo, Corona, and Pacifico. This move supports Jim's goal, laid out at Friday's annual meeting , of diversifying the portfolio beyond companies tied to the data center buildout in case these projects become tougher to complete in the coming years. To that end, we want to add a less cyclical company with a cheap valuation and that consistently returns capital to its shareholders. Constellation Brands trades at roughly 12 times its next 12-month earnings-per-share estimates, pays a nearly 3% dividend yield, and has cash flow left over to support share repurchases. The company reported better-than-feared results last month, with net sales up 6% year over year and adjusted earnings per share of $3.74, beating the consensus estimate of $3.56. Digging deeper into the quarter, beer category growth remains muted, partly due to the rise of GLP-1 drugs, which reduce cravings for alcohol as well as food. On top of that, the category faces headwinds from younger consumers, who are more health-conscious. Despite this stagnant backdrop, Constellation is picking up market share in the beer market. Shipments were up a much better-than-expected 5.5%. Constellation's various brands were mixed. Going by depletions, which is the volume of product moving from wholesalers to retailers, Modelo Especial was down 2%, and Corona Extra was down 5%, but that was mostly offset by Pacifico up 19%, Victoria up 15%, and Modelo Chelada up 5%. The wine and spirits business has long been a problem, but it is much smaller now after the divestment of its mainstream wine brands last year. The portfolio today is mostly in higher-growth, higher-margin brands including Robert Mondavi, Kim Crawford, High West whiskey, Nelson's Green Brier whiskey, Mi CAMPO tequila, Casa Noble tequila, and others. In the recent quarter, net sales grew 17% year over year, and the division even put up a small operating profit. The initial reaction to Constellation's earnings in October was negative, with shares falling more than 7% at one point because the company did not raise any part of its full-year forecast. When you beat the numbers but leave your guidance unchanged, Wall Street may take it as a sign that the rest of the year will be weaker than expected. But the stock rebounded on the earnings call after CEO Nick Fink explained that "if the positive September trends that we saw continued, we would expect to land at the high end of the range." While Constellation did not formally raise its guidance, it had a good September and, assuming no slowdown from here, expects to land at the high end of its annual forecast. Recent NielsenIQ data show that Constellation Brands' beer sales have steadily improved since September, turning positive with 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 its earnings report, the company announced it will pay $75 million up front, and as much as $278 million in contingent consideration over the next five years, to acquire SpikedAde, which makes sports drinks spiked with Vodka. Constellation's previous management team had a horrible acquisition track record, wasting billions of dollars on deals including Canopy Growth, Funky Buddha Brewery, and Ballast Point Brewing. But that team is gone. This deal strengthens the company's position in the fast-growing ready-to-drink (RTD) category. While there's always some risk that Constellation is chasing a trend here, the deal's structure means it won't have to pay much if SpikedAde fails to hit its milestones. The results of last week's midterm elections, in which Democrats flipped both chambers of Congress and won several key gubernatorial races, could also benefit Constellation Brands if they lead to an easing of immigration policies. Constellation's portfolio overindexes with Hispanic consumers: At its September 2025 investor day, the company estimated that Hispanic consumers account for about 40% of its beer business. Spending and social gatherings among Hispanic consumers have come under pressure amid the Trump administration's immigration crackdown. In a Sunday interview with CBS' "60 Minutes," President Donald Trump acknowledged that his administration's immigration and deportation policies may have been "too tough." A Democratic-controlled Congress could seek to soften or reverse those policies, providing a tailwind for Constellation's beer business. We are starting our Constellation position with a $165 price target, which represents a little less than 14 times calendar year 2027 FactSet EPS estimates. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. 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