Warren Buffett’s company, Berkshire Hathaway, invested $1.8 billion in seven stocks last quarter. The details were revealed in the company’s quarterly 13F filing with the Securities and Exchange Commission (SEC). One of the stocks Buffett bought stands out as an exceptional value.
It is Constellation Brands, which owns leading Mexican beer brands such as Corona and Modelo. These brands dominate U.S. sales for Mexican lagers. Constellation Brands recently narrowed its focus by selling its mainstream wine brands.
It is now focusing on high-end beverage brands. The company expects low-single-digit sales growth over the next three years.
Buffett bets on Constellation Brands
This will be driven mainly by its high-performing beer sector, which accounts for over 80% of sales and 90% of operating income. The management also projects an increase in operating margins by 1 to 2 percentage points over the next few years. This is expected to generate between $6 billion to $7 billion in free cash flow.
Around $4 billion of this is planned for share repurchases, which could reduce the share count by over 13% at current prices and drive shareholder value. Constellation Brands’ portfolio is resilient and its management is focused on capital returns and high-margin growth opportunities. This makes the outlook for the business strong.
The stock is trading at less than 14 times forward earnings estimates, making it an appealing option for value investors. Given Buffett’s recent investments, Constellation Brands appears to be the standout opportunity among the stocks Berkshire Hathaway acquired. With strong fundamentals and promising growth prospects, it deserves consideration as a valuable addition to any investment portfolio.
