Warren Buffett Bought a Stock That’s Been Trending Downward — Should You Buy Too?
Written by
Vance Cariaga
Edited by
Amen Oyiboke
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Ordinarily, investors might not think too highly of a stock with minimal financial growth and a share price that has sunk by nearly one-third over the past year.
But when that stock counts Warren Buffett among its top shareholders, it’s worth taking a closer look at.
In this case, the stock is alcohol producer Constellation Brands, maker of Modelo, Corona and other familiar brands. As of late 2024, Buffett’s Berkshire Hathaway owned 5.6 million shares of Constellation, according to SEC filings cited by Yahoo Finance. That position makes Berkshire the sixth-largest shareholder of Constellation stock.
When news of the filing surfaced in February, Constellation shares immediately popped more than 5%. The momentum didn’t last long, however. Its stock price — which currently trades near $183 per share — has fallen about 17% since the beginning of 2025 and is down roughly 32% over the past year.
So, why does Buffett hold such a large stake in Constellation Brands? Much of it has to do with the company’s allure as a value stock and solid financial performer, experts say.
In a recent report for Barchart, financial analyst and investment manager Mark Hake suggested that Constellation’s stock “looks undervalued” based on the company’s average yield over the past five years and its “strong” free cash flow.
“STZ is down based on fears of tariffs, as its beer plants are located in Mexico, and the effect this will have on future sales,” Hake wrote. “But have these fears gone too far?”
As Hake noted, Constellation has already said it will “likely hike” its dividend when it announces its fiscal year-end earnings on April 10, 2025. It also said it will likely report strong free cash flow for its fiscal year, which ended on February 18.
“It’s highly likely that the company will continue to produce strong free cash flow and can afford to raise its dividend,” Hake added. “The bottom line is that STZ stock looks cheap today.”
The combination of cheap stock price, strong cash flow, and steady dividends makes Constellation an ideal buy for value investors — even if its financial growth isn’t exactly setting the world on fire.
The company’s fiscal quarter three sales and earnings were little changed from the previous year, according to a January 10 press release. Zacks Equity Research expects Constellation’s quarter four sales and earnings to come in only slightly above last year’s results and said the company doesn’t appear to be a “compelling earnings-beat candidate.”
On the plus side, Constellation remains solidly profitable and has a low P/E ratio compared with rivals, meaning its stock price is pretty cheap based on its earnings. These dynamics align well with Berkshire Hathaway’s “bargain hunter” investment mentality, according to CFRA analyst Garrett Nelson.
“They look for deep value … stocks that are trading at a steep discount to projected future cash flows,” he told Yahoo Finance.
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