The CNBC Investing Club with Jim Cramer announced its decision to sell 225 shares of Constellation Brands at approximately $172 per share. This strategic move aims to reduce the club's position in the company by half. The sale acts as a hedge against the potential short-lived nature of tariffs imposed by the U.S. on Mexico, as President Trump's transactional approach to tariffs suggests they may not last long. This comes amid concerns that the market has underestimated the risks associated with these tariffs.
President Trump has utilized tariffs as a bargaining tool to secure more favorable deals, which has led to varying market reactions. Constellation Brands, which relies on sourcing its beer from Mexico, finds itself directly impacted by these tariffs. However, analysts from Piper Sandler recently downgraded their rating on Constellation to neutral, underlining potential financial risks. If the tariffs persist for a full year, the company's fiscal year 2026 earnings per share could face a significant hit, ranging from $3.00 to $3.75.
Jim Cramer's Charitable Trust will retain 225 shares of Constellation Brands (STZ), reducing the trust's weighting in the company from 2.22% to 1.11%. Initially, there was a possibility that Constellation Brands might escape tariff impositions, which led to a delay in adjusting the portfolio. However, recent developments necessitated the current course of action.
In anticipation of potential tariff implications, the portfolio had previously taken proactive steps in January by selling shares of Stanley Black & Decker at about $90 per share. This decision resulted in a loss of approximately 30% on stock acquired in 2022. Despite the loss, this move was part of a broader strategy to mitigate some of the risks associated with tariffs.
Meanwhile, the U.S. will impose a 25% tariff on goods from China starting Tuesday, further complicating international trade relations. The announcement of these tariffs is expected to lead to a sharply lower open for the market on Monday.
Constellation Brands faces a challenging landscape as it considers whether to increase prices in response to tariff pressures. The company's reliance on Mexican beer production makes it particularly vulnerable to these geopolitical shifts.