Bill Stone on Investing in Spirits and Pharma Stocks During Economic Uncertainty

Navigating Tariffs and Economic Headwinds

• 📈 Bill Stone believes tariffs are here to stay, regardless of specific implementations, due to presidential powers.
• ⚠️ Investors should prepare for potential economic pressure, especially as the market has rebounded strongly, pricing in a low chance of recession.
• 💡 When markets move significantly, it's prudent to look for overlooked and neglected stocks.

Constellation Brands: A Defensive Play

• 🍺 Constellation Brands is highlighted as a stock to consider because alcohol consumption remains stable during economic downturns.
• ⚠️ While facing short-term headwinds with Mexican beer brands like Corona due to tough year-over-year comparisons, the brands themselves are strong.
• 💰 The stock's valuation is considered extremely attractive, being among the cheapest since the acquisition of these brands.
• 🤝 It's noted that Berkshire Hathaway has been actively buying Constellation Brands stock.

Merck: A Pharma Stock with Risks and Rewards

• 💊 Merck is presented as another option, despite being down 23% year-to-date, with the administration being less friendly to pharma.
• 🔬 The company's success with Keytruda in cancer treatment is a significant positive, but its patent expiration in 2028 poses a risk, potentially impacting nearly 50% of revenues.
• 💰 The stock is cheap at nine times earnings with a nice dividend, offering a yield to compensate for the risk.
• 🛠️ Stone believes Merck is doing a good job of "restocking the cabinet" with new products to offset the Keytruda patent cliff.

Bond Market and US Dollar's Role

• 📉 While Jamie Dimon is concerned about the bond market, Stone notes there are no immediate signs of crisis in the US, with 2-year and 10-year yields down year-to-date.
• 🌍 However, 30-year yields are up globally, suggesting the bond market is less willing to fund deficits.
• 🇺🇸 The US benefits from the extraordinary privilege of its global currency status and owning the "printing press," alongside a resilient economy, making it a less likely place for an immediate crisis.
• ⚠️ Dislocations in the bond market will happen eventually, but Stone suggests it's not something to lose sleep over at the moment.