Market noise is everywhere. Financial headlines focus on the same handful of stocks while important opportunities – the kind that can meaningfully impact your portfolio – often fly under the radar.
That’s exactly why we publish this watchlist each week.
While most investors get distracted by mainstream stories, we’re digging through earnings reports, analyzing technical setups, and monitoring where institutional money is flowing to identify companies at potential turning points. Our focus isn’t on what’s already priced in, but rather on what the market hasn’t fully recognized yet.
Each week, we spotlight three stocks that deserve your attention. We look for opportunities where timing, valuation, and potential catalysts align to create favorable entry points.
Here’s what we’re watching this week:
Constellation Brands (STZ)
Constellation Brands represents a contrarian value opportunity as the premium alcohol portfolio company trades down more than 50% from early 2024 peaks following near-term headwinds that obscure longer-term strategic positioning and Warren Buffett’s Berkshire Hathaway stake building. Trading around $134 per share with a $23 billion market cap and offering a 3.1% dividend yield, the company owns leading brands including Modelo and Corona beer, Kim Crawford and Ruffino wine, and Mi Campo and Casa Noble tequila generating $10.2 billion in annual revenue.
The recent weakness stems from cyclical alcohol consumption pressures:
- Recent Gallup polling shows record low 54% of Americans regularly drink alcoholic beverages
- Down from figures consistently above 60% since late 1990s
- Shift reflects post-pandemic lifestyle changes, economic malaise, and health consciousness
- Constellation’s revenue fell 7% through first half of current fiscal year with profits declining similarly
The investment thesis centers on management’s strategic pivot toward higher-margin premium segments while divesting value-priced wine brands:
- CEO Bill Newlands: “This transaction reflects our multi-year strategy to reconfigure our business, resulting in a portfolio of higher-end wine and craft spirits brands”
- While overall alcohol sales slip, premium and super-premium categories continue generating measurable growth
- Consumers drink less but drink better
The financial outlook supports this strategic direction:
- Management expects mid-single to low-double-digit per-share earnings growth next fiscal year
- Followed by low-single to mid-single-digit growth as initiatives fully implement
- Dividend remains well-supported at approximately 30% payout ratio
- Provides substantial cushion to maintain payments while investing in growth
Notably, Warren Buffett’s Berkshire Hathaway established a Constellation position late last year and has substantially added to the holding:
- Now owning 13.4 million shares worth nearly $2 billion
- While not massive stake by Berkshire standards, world’s most famous value investor rarely makes moves without conviction
For dividend investors seeking quality consumer brands trading at distressed valuations with downside largely wrung out, Constellation’s combination of 3.1% yield, strategic repositioning toward premium segments, and Buffett backing creates compelling risk-reward.
Starwood Property Trust (STWD)
Starwood Property Trust presents a compelling high-yield opportunity as the diversified mortgage REIT offers nearly 11% yield backed by over a decade of stable dividend payments and a significantly lower-risk portfolio compared to single-strategy peers. Trading around $18 per share with a $7 billion market cap, Starwood has maintained its current dividend rate for more than a decade without any reductions.
This stands in stark contrast to competitors like AGNC Investment which cut its dividend from $0.22 monthly in 2014 to $0.12 today with the last reduction in 2020.
The fundamental differentiation stems from Starwood’s diversified investment approach:
- Approximately 53% to loans backed by commercial real estate including multifamily, office, industrial, hotel, and other properties
- 9% to residential loans
- 10% to infrastructure-backed loans
- Provides relatively stable interest income compared to single-asset-class strategies
Additional portfolio stability comes from direct property investments representing 19% of assets:
- Medical offices, affordable housing, and net lease real estate
- Generates stable and steadily rising rental income
- Company significantly enhanced diversification through $2.2 billion acquisition of Fundamental Income Properties
- Adding income-producing net lease properties backed by 17-year weighted average lease term with 2.2% average annual lease escalation rates
The diversification strategy provides crucial flexibility:
- Adjust investment approach based on market conditions
- Not forced into single asset class regardless of attractiveness
- During Q3, Starwood invested $4.6 billion including the $2.2 billion Fundamental Income acquisition
- Record $800 million into infrastructure lending, capitalizing on attractive risk-adjusted returns
This adaptability contrasts sharply with Agency MBS-only strategies that must invest in residential mortgage-backed securities regardless of market conditions.
For income investors seeking reliable high-yield exposure, Starwood’s combination of nearly 11% yield, decade-plus track record of stable dividends without reductions, diversified asset base providing downside protection, and management flexibility creates superior risk-adjusted returns.
Centrus Energy (LEU)
Centrus Energy represents a high-conviction play on the nuclear renaissance as the only Nuclear Regulatory Commission-licensed producer of high-assay, low-enriched uranium for both commercial and national security applications. Trading around $242 per share with a $4.4 billion market cap after declining 47% from its $464 52-week high, the company is uniquely positioned as the sole entity capable of producing HALEU outside of Russia.
This positioning becomes critical as HALEU will power the next generation of nuclear reactors:
- U.S. electricity demand projected to grow at 2.5% compounded annually according to Bank of America Institute
- Five times faster than previous decade
- Nuclear power accounts for 18% of current U.S. electricity as largest low-carbon clean energy source
The investment thesis centers on Centrus becoming a vital player in domestic nuclear fuel supply chain:
- Two key business segments: low-enriched uranium sales to utilities and technical solutions providing advanced uranium enrichment services
- Significant HALEU operation contract with Department of Energy
- While commercially active HALEU reactors may not become operational until late 2020s or early 2030s
- Several companies including TerraPower, Kairos Power, Westinghouse Electric, and Oklo developing HALEU or HALEU-capable reactor designs
The strategic opportunity intensifies with the Russian LEU import ban:
- Expected to be fully phased in by 2028
- Creates urgent need to replace approximately 25% of enriched uranium currently imported from Russia
- Centrus currently has Department of Energy waiver allowing LEU imports for committed U.S. customer deliveries in 2026 and 2027
- Must transition from reseller to domestic producer
The company aims to produce both LEU and HALEU in-house:
- Using advanced centrifuge technology
- Expanding uranium enrichment capacity at Piketon, Ohio plant
- Contingent on Department of Energy funding, private investment, and long-term customer commitments
The valuation reflects both opportunity and execution risk at 48.6 times projected earnings, down substantially from 88 times multiple at recent highs but still elevated by traditional standards. Industry analysts note Centrus is “uniquely positioned” to play a significant role in rebuilding the nuclear enrichment supply chain.
The growth trajectory depends heavily on Piketon plant buildout requiring significant upfront investment with uncertain timing. For investors believing nuclear represents the energy future and willing to accept volatility, Centrus’s recent 47% decline creates an attractive entry point.