Corona beer maker Constellation Brands takes action aimed at enhancing shareholder value and stock pops
Constellation Brands (STZ) shares are popping more than 3% in after-hours trading after the Corona and Modelo beer company made a slew of announcements to enhance its corporate governance. First, the company made two new additions to its board of directors. Luca Zaramella, the CFO of Mondelez International , and Bill Giles, the former CFO of AutoZone , were elected effective Tuesday, following the conclusion of the company's 2023 annual shareholders meeting. Usually, we wouldn't fault anyone for glossing over news like this, but there's a big decision to pay close attention to here. The selection of these two board members was made as part of a collaboration with an activist investor that's known to shake things up to create value for shareholders: Elliott Management. The firm said Tuesday evening it's among the beer maker's largest investors due to its belief in the company's "meaningful growth potential, powered by its premier Mexican beer portfolio," which is not reflected in the stock price. Second, Club holding Constellation said it's entered into an information sharing and cooperation agreement with Elliott, allowing the firm to sit in on board meetings and receive certain non-public information but not trade the stock. This agreement will allow Elliott to make recommendations to management in the best interest of shareholders. Elliott was also recently involved in a multi-activist situation at Club name Salesforce (CRM), which resulted in more value for shareholders. STZ YTD mountain Constellation Brands YTD performance News like this at Constellation is all made possible thanks to the company eliminating its dual-class share structure late last year. Sure, Constellation had to pay a hefty premium to effectively buy the Sands' family out of their super-voting Class B shares. But we always argued the price Constellation had to pay would be well worth it because the company would no longer be forced into poor capital allocation decisions and bad acquisitions like Canopy Growth or Ballast Point. Instead, the company could allocate more of its free cash flow to growing the dividend and opportunistic buybacks. The elimination of the super-voting line also opened the door to activist investors potentially taking an interest in the stock, especially since it has lagged other beverage peers. Even though Modelo Especial has overtaken Bud Light as the best-selling beer in the United States, Constellation Brands' year-to-date gain of about 10% is not in the same ballpark as the 31% rise in Molson Coors Beverage . Molson has also gained market share due to Bud Light boycotts by people upset about a marketing campaign with a transgender influencer. Shares of Anheuser-Busch Inbev , which makes Budweiser, have dropped more than 4% year to date. And third, the company plans to host an investor day later this year to provide an update on its strategic initiatives and outlook for its beer and wine and spirits businesses. This is about management trying to tell the Street the new story, one that is unique among the entire consumer staples sector since its growth is driven by higher volumes and not reliant on price. We'll have more to say about all this Wednesday but news Elliott is involved in Constellation is a great sign that potential value-unlocking opportunities may be on the horizon. As one of the few bright spots with a gain of nearly 10% versus a roughly flat return for the consumer staples sector, we trimmed Constellation Monday. But we still have a sizable position in our portfolio of nearly 3% to capture further upside if Elliott pushes for value-creating changes. (Jim Cramer's Charitable Trust is long STZ. See here for a full list of the stocks.) 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. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Corona beer, owned by Constellation Brands. Getty Images