Why Warren Buffett Is Betting on Constellation Brands Despite Its Stock

🔍 Introduction

Imagine seeing a stock that’s dropped over 30% in a year. Most investors would probably run the other way, right? But not Warren Buffett. When someone like Buffett makes a move, the whole investing world stops to ask — why?

Well, one of his latest moves includes a surprising addition to Berkshire Hathaway’s portfolio: Constellation Brands — the company behind some of the world’s most loved alcoholic beverages like Modelo and Corona. Despite a shaky stock performance, Buffett’s stamp of approval has everyone giving STZ another look.

Let’s dive into why this “boring” beverage stock may actually be a hidden gem.

🍺 Who is Constellation Brands?

Constellation Brands is no small fry in the alcohol industry. It’s a major player with premium beer, wine, and spirits brands under its belt. Think Modelo, Corona, Pacifico — yeah, the stuff you sip on a sunny beach day.

Founded in 1945, this New York-based company has built a global reputation, especially in North America. And in recent years, it’s been sharpening its focus on premiumization, which means selling higher-end products with better margins.

📈 Warren Buffett’s Investment Strategy

Buffett isn’t known for chasing trends. In fact, he avoids them like the plague. His investment philosophy centers around value: buying great companies at fair or undervalued prices and holding them for the long term.

So when he buys into something like Constellation Brands, it’s not about hype — it’s about strong financials, reliable returns, and long-term value.

💼 Buffett’s Stake in Constellation Brands

According to SEC filings released in early 2024 and reported by Yahoo Finance, Berkshire Hathaway holds 5.6 million shares of Constellation Brands. That’s no pocket change — it places Berkshire as the sixth-largest shareholder of the company.

And when news of this surfaced in February 2025, shares popped over 5% instantly. That’s the Buffett effect.

📉 What’s Going on With Constellation’s Stock?

Let’s be real — STZ’s stock hasn’t exactly been a party. As of April 2025, it’s trading around $183, down about 17% since January and roughly 32% lower than a year ago.

For most, that’s a red flag. For Buffett, it’s an invitation.

📊 Market Reactions and Short-Term Volatility

After Berkshire’s holding was disclosed, the stock saw a quick surge. But the excitement faded fast. Why? Because Wall Street’s obsessed with short-term gains. Buffett? He’s eyeing decades, not days.

🧠 Why Buffett Might See Opportunity

Behind the gloomy charts lies a company with strong bones. STZ still generates solid revenue, has iconic brands, and maintains predictable cash flow.

That’s like catnip for value investors.

💰 Dividend Hikes on the Horizon

According to financial expert Mark Hake, Constellation is likely to raise its dividend during its fiscal year-end earnings report. More dividends mean more passive income for shareholders — a key Buffett attraction.

And get this: Hake also highlighted the company’s strong free cash flow, meaning it has the financial muscle to reward investors consistently.

📈 Free Cash Flow and Value Metrics

Free cash flow (FCF) is what companies have left over after covering operating expenses and capital expenditures. It’s a big deal.

Buffett loves FCF because it shows the true earning power of a business. Hake noted that STZ is undervalued when comparing its average yield over the past five years.

Translation? It’s a bargain hiding in plain sight.

🌍 The Tariff Issue and Market Overreaction

Yes, there’s concern about U.S.–Mexico tariffs affecting Constellation’s beer plants located south of the border. But let’s not get carried away.

Hake argues these fears may be overblown, especially since the company is already factoring that into future planning.

📆 Fiscal Performance of Constellation Brands

Q3 earnings were basically flat compared to the previous year. Not thrilling, but not tragic either. Meanwhile, analysts at Zacks expect Q4 results to tick slightly upward.

Is STZ blowing the roof off with growth? Nope. But it’s consistently profitable, and that’s gold in uncertain markets.

📊 Comparison With Industry Peers

Compared to other booze brands, STZ has a lower Price-to-Earnings (P/E) ratio, meaning you’re paying less for every dollar of earnings.

Think of it like finding the same bottle of wine at Costco instead of a fancy boutique. Same wine, better deal.

🌎 Long-Term Investment Outlook

Constellation’s brands are only growing in popularity, especially among younger drinkers who are leaning toward premium beers and ready-to-drink cocktails.

Plus, the company has room to expand in international markets, which could offer a major revenue boost in the long run.

⚠️ Risks Investors Should Know

Of course, it’s not all smooth sailing. Investors should consider:

• Tariff and trade tensions
• Shifts in consumer preferences
• Supply chain hiccups

But these risks seem manageable, especially for a company with such a solid foundation.

🤔 Is It a Good Buy for the Average Investor?

If you’re looking for the next flashy tech rocketship — this isn’t it.

But if you’re a patient investor, love steady dividends, and believe in brand strength, Constellation might just be your next quiet winner.

It’s a classic value play — underappreciated today, but likely to pay off tomorrow.

✅ Conclusion

Warren Buffett doesn’t chase shiny objects. He bets on companies with solid fundamentals, real cash flow, and loyal customer bases — like Constellation Brands.

Sure, the stock’s been on a losing streak, but for long-term investors, that just might make it a steal. With dividend hikes expected, strong FCF, and iconic brands, STZ fits right into the Buffett blueprint.

💡 FAQs

1. Why did Warren Buffett invest in Constellation Brands?
Because of its strong free cash flow, undervalued stock price, and potential for long-term returns.

2. Is Constellation Brands a good stock for dividends?
Yes, especially with expected dividend hikes and steady cash flow.

3. Why is STZ stock down so much?
Market fears over tariffs and modest growth have led to a sell-off, but analysts believe it’s overdone.

4. What makes Constellation a value stock?
It trades at a low P/E ratio compared to peers and has consistent profitability and strong brand recognition.

5. Should new investors consider buying Constellation Brands now?
If you’re into value investing and can ride out short-term volatility, it might be a solid choice.