Core Insights - Small cap stocks have been outperforming large cap stocks since November, with a focus on undervalued small cap stocks as potential investment opportunities [1] Group 1: Lamb Weston - Lamb Weston is North America's largest frozen potato producer, specializing in French fries for restaurants [2] - Global frozen potato demand grew at a rate of 5% per year before the pandemic, with expectations for a return to high growth supported by favorable market conditions [3] - Lamb Weston is assigned a narrow economic moat rating due to cost advantages and strong customer relationships, with a stock valuation of $80 per share [3] Group 2: Brown Foreman - Brown Foreman manufactures premium distilled spirits, including the well-known Jack Daniels whiskey and bourbon brands like Woodford Reserve and Old Forester [4] - Recent results have been impacted by demand weakness in North America and Europe, but brand strength and innovation are expected to drive annual sales growth of 3% over the next decade [5] - The stock is valued at $37 per share based on its strong brand portfolio [5]

Core Insights - Alcohol sales in the U.S. are declining, with a Gallup survey indicating that only 54% of adults consume alcohol, the lowest in nearly 90 years [2] - The decline is attributed to health concerns, economic factors, and the rise of alternative beverages [3] Industry Overview - Economic factors such as inflation and rising living costs are making consumers more selective in discretionary spending [3] - The availability of alternatives like cannabis and nonalcoholic beverages is providing consumers with more choices [3] Company Performance - Constellation Brands reported better-than-expected fiscal second-quarter results but lowered its full-year guidance due to macroeconomic challenges [4] - The company noted significant volatility in sales, particularly in high Hispanic Zip Code areas, which are crucial for its Modelo brand [5] - 80% of surveyed consumers expressed concern about the socioeconomic environment, with 70% specifically worried about personal finances [6] Consumer Behavior - There is a noted increase in brand loyalty for Constellation's products, particularly for Corona and Modelo among Hispanic consumers [7] - The company has a higher share of Gen Z consumers compared to the industry average [8] Financial Outlook - Despite current headwinds, the company remains confident in its long-term growth trajectory [9] - The expected tariff impact on Constellation's beer business is about $70 million, with an additional $20 million on the wine business [9] - Constellation's stock has decreased by 35% this year and nearly 41% from the previous year [10] Competitor Insights - Boston Beer has also faced challenges, with its stock down nearly 27% this year [11] - The company sees long-term growth opportunities in nonbeer alcoholic beverages, which represent over 85% of its volume [12] - Anheuser-Busch InBev reported a decline in volumes, particularly in China, despite revenue and profit increases [13]