Buffett’s Berkshire Hathaway invests $1.24B in Constellation Brands

Warren Buffett’s Berkshire Hathaway has invested significantly in Constellation Brands, the company behind popular beer labels like Corona, Modelo, and Pacifico. Berkshire acquired a $1.24 billion stake in Constellation, which accounts for 0.5% of its portfolio. This move highlights Buffett’s confidence in the long-term prospects of the alcoholic beverage market despite current concerns about potential tariffs on Mexican beer imports. Constellation’s stock price has dropped by 26% since the beginning of the year, making it an attractive value investment for Buffett. Citi’s lead beverages analyst, Filippo Falorni, sees this as a classic example of Buffett’s value investing strategy. Looking beyond the near-term tariff issues, the long-term business remains very attractive with growth in the fastest-growing part of the beer category, favorable demographic trends with exposure to the faster-growing Hispanic population in the U.S., and significant distribution opportunities for the Corona, Modelo, and Pacifico brands,” Falorni said. Constellation imports all of its beer from Mexico. It has facilities in Nava and Obregon and a third under construction in Veracruz.

Buffett’s Confidence in Constellation Brands

However, potential tariffs from the Trump administration could significantly impact the company’s earnings per share. Falorni estimates that tariffs could lead to a 28% negatively impact Constellation’s EPS. On the other hand, if tariffs are less severe or do not materialize, the company could be significantly undervalued at current levels. Changing consumer preferences and the ongoing recovery of the hospitality industry post-pandemic are other factors that could influence the success of Buffett’s investment. Despite these challenges, Buffett’s long-term perspective and ability to look beyond short-term market fluctuations are reflected in his decision to invest in Constellation Brands. “Warren Buffett is looking at the value of the business in the long term and believes the stock is undervalued due to those external concerns,” Falorni added. Constellation Brands did not return requests for comment on the investment.