About: Treasury Wine Estates is a global wine company that sells wine to over 100 countries. TWE has over 13,000 hectares of vineyards predominately across Australia, New Zealand and the US and is well known for brands such as Penfolds, Wolf Blass, Beringer and Lindemans to name a few.

Why it’s in the portfolio: TWE provides the portfolio with exposure to a globally diversified business within the consumer discretionary sector. It is expected to have strong international growth prospects so offers investors a reasonably priced growth stock.

Fundamentals: TWE has recently revised forward earnings and the stock now sits at around $13. This puts it on a forward price-to-earnings ratio of around 22 times, so it isn’t exactly “cheap” but is expected to grow earnings by around 5 - 10% per annum over the next 2 to 3 years (based on consensus estimates). TWE has a relatively strong balance sheet and offers a grossed-up dividend yield of around 3%.

What could go wrong? A large part of TWE’s growth is expected to come from sales into China. Any slowing of growth from China or regulatory issues that impact its ability to sell into China would negatively affect the share price. In the past, TWE’s business has been impacted by a glut of over-production of wine across the industry. While some of these structural issues of the industry have abated over the recent decade, investors may still want to take into consideration that the stock may be impacted by the nature of the wine industry and competition within the industry.