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Barrels of wine in the cellar of Peller Estates in Niagara-On-The-Lake. (Glenn Lowson/The Globe and Mail)
Barrels of wine in the cellar of Peller Estates in Niagara-On-The-Lake. (Glenn Lowson/The Globe and Mail)

Schizas’ Mailbag

Ontario winemaker's shares grow slowly on the vine Add to ...

Hi Lou,

I was wondering if you could look at Andrew Peller class A shares.

Thanks,

Pat

Hey Pat,

Thanks for the assignment.

This will be my first survey of the particulars associated with Andrew Peller Limited. The company is a leader in the Canadian wine market with products in every category from premium to ultra-premium brands such as Peller Estates and Trius to wine making products for the at home vintner such as Wine Kitz. In the mid-market segment Peller offers established brands such as Hochtaler and a Domaine D’Or. The portfolio also includes one hundred retail locations.

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The dividend yields 2.94 per cent and the average daily volume over the last thirty days is 6,769 shares. The market capitalization is $207.14-million.

A study of the charts will provide further details to the evaluation of ADW.A.

The three-year chart depicts a stock that has enjoyed a great ride that started in December of 2011 when it broke above resistance at $8.50. Since July of 2013 the shares have been building a base with support at $13.50. Some analyst have speculated that the shares could be worth up to $20.00 if a major international beverage company were looking for a Canadian acquisition. Of course “if” is the operative word.

The six-month chart portrays the tight trading range that has been in place with support at $13.50 and resistance at $14.00. The next flex point for the stock will be when they report their quarterly results on Feb. 11, 2014.

From the research conducted on your behalf it appears that ADW.A has to be approached with a long investment horizon. There are some cost challenges that management has been addressing in the competition for grapes domestically and internationally. It should come as no surprise that when your main ingredient depends on growing conditions you are a slave to nature’s whims.

Given the thin trading volume for this stock you should pick away at this one to build your position.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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