Treasury Wine Estates (TWE) is a well-known global wine company that produces and markets premium brands such as Penfolds and 19 Crimes across key markets including Australia, the US and Asia. The companies report last month was a sorry read, struggling with structural headwinds, i.e. people are drinking less. The stock fell ~5% on the release (Covered Here) and has lost another ~15% over the last few weeks, not helped by the news of CFO Stuart Boxer’s retirement this week.
The SP in TWE has increased from 4% to 14% over the last 6-months although it’s not moved meaningfully over the last 6-weeks, some encouragement for “bottom pickers”. It currently has a 13.9% SP, the 3rd most shorted stock on the ASX. Also, some positive signs are emerging in their US business in the luxury area, although excess inventory needs to be wound back first, while the strong $A is also a new headwind for the exporter.
However, French billionaire Olivier Goudet increased his stake in Treasury Wine to 7.13% after spending $3.6mn buying additional shares over the past two trading days, continuing purchases made throughout February. Goudet, whose investment fund Platin first emerged as a substantial holder late last year, says he believes the company is undervalued and is investing with a long-term horizon. We note that Goudet does have a background in M&A and is famous for large-scale acquisitions in consumer brands such as Keurig Dr Pepper, Pret A Manger, Panera Bread and Krispy Kreme.
- We couldn’t be short TWE close to $4, especially with Goudet buying stock; it could be time for a “punt” for contrarian investors.
MM is neutral towards TWE around $4.20
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