Treasury Wine Estates is a tasty investment opportunity

Mr Vince Pezzullo, a portfolio manager at Perpetual (ASX: PPT) has commented in a recent note that the funds management firm likes the look of Treasury Wine Estates (ASX: TWE) at current prices.

Perpetual knows Treasury well. The firm previously owned the stock but sold out earlier in the year when the share price went above $6. With the stock down to $4.70 after surprising the market with a large inventory write-down on some US wine, Mr Pezzullo says Perpetual has “taken the opportunity to re-establish a position across many of our portfolios at around $4.70.”

Mr Pezzullo’s comments provide investors with an idea of at what price Perpetual sees value and at what price it doesn’t see value in Treasury Wine’s shares.

Mr Pezzullo also singled out demand and the growth potential in China as a major opportunity for Treasury over the medium to long term, noting that “wine is currently China’s fastest growing consumer staples category, growing at 25% per annum.”

There are not many other ways to directly buy into Chinese consumer consumption through locally listed companies. The dairy sector is one other way to gain exposure to growing Chinese demand for quality food and beverage supplies, however the battle for Warrnambool Cheese & Butter Factory (ASX: WCB) since Bega Cheese’s (ASX: BGA) initial approach has set a rocket under share prices within the sector.

Foolish takeaway

Treasury Wine looks like it could be a classic contrarian investment opportunity. The stock is currently out of favour with many investors due to the inventory issues, and the recent rebound in the Australian dollar means the expected benefits of a lower dollar are yet to be realised.

Couple these ‘headline issues’ with strong demand from China and a tightening of global wine grape supplies due to lower production levels globally and its possible the market is under-rating both Treasury’s near-term and longer-term future potential.

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Motley Fool contributor Tim McArthur owns shares in Perpetual Ltd.

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