Warren Buffett’s Berkshire Hathaway (BRK.B) made a notable bet recently after disclosing a $1.24 billion stake in Constellation Brands (STZ), the parent company of Modelo, Corona, and a wide range of premium beer, wine, and spirits brands. The investment, revealed through Berkshire’s Q4 2024 13F filing, marked a rare move in a time when Buffett has been largely unloading equities and building an increasingly defensive cash position.
The timing of the purchase is especially notable. Buffett and his team bought into Constellation prior to the latest wave of market turmoil. Since then, Constellation’s stock has fallen more than 20%, with the decline accelerating after President Donald Trump announced a fresh round of tariffs earlier this year. The tariffs pose a direct risk to Constellation’s supply chain, as the company relies heavily on beer production facilities in Mexico. The new duties have stoked fears that increased costs could significantly impact the company’s margins.
Despite the sharp selloff, Constellation Brands remains fundamentally strong. In its latest earnings report, the company reported net sales of $2.16 billion, a 1.17% increase year-over-year. Comparable earnings per share came in at $2.63, beating analyst expectations, and the company reported strong free cash flow of $1.9 billion over the trailing 12 months. Modelo Especial continues to be a standout performer, maintaining its position as the top-selling beer in the U.S., following its overtaking of Bud Light in 2023. The company also raised full-year guidance, citing resilient demand and solid growth across its portfolio.
However, the tariff overhang has sparked fresh concerns among investors. As a beer importer with substantial reliance on Mexican brewing operations, Constellation is particularly exposed to rising input and transportation costs.
What makes Buffett’s investment all the more intriguing is how out of character it seems amid his broader market posture. In recent quarters, Berkshire Hathaway has sold tens of billions in equities and built its cash reserves to over $334 billion — a continued record. Buffett has openly expressed caution about equity valuations and macroeconomic risks, including inflation, interest rates, and geopolitical instability. Yet, Constellation appears to be one of the rare exceptions he and his team are willing to bet on.
Despite the recent slide, many analysts maintain bullish long-term ratings on the stock. The stock currently sits around $185 per share, but has an average analyst price target of $213.17. Its highest price target is $295, with a low of $165.
Buffett has often said that the best opportunities arise during times of fear, and Constellation’s current slump may be a textbook case. The company owns some of the most dominant beverage brands in North America, boasts consistent cash generation, and is well-positioned for long-term demand growth in both premium beer and spirits. If the tariff impact proves temporary or less severe than feared, today's dip may turn out to be a bargain in hindsight.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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