Brad Simmerman reports that Warren Buffett’s Berkshire Hathaway opened a new billion-dollar position in Constellation Brands, an alcoholic beverage company, despite the company being “hated” by other investors. Buffett purchased 5.6 million shares, making it a significant new holding in his portfolio. However, insider transactions tell a different story.
In the last 12 months, there have been 42 insider transactions, with only 10 being buys. Insiders have sold a net of 569,000 shares, worth $106 million at current prices. The largest single transaction was a $29 million sale by Robert Sands, a director at the company.
Berkshire’s stake has already lost 21.9% since it was initiated, with the average purchase price at $239.50 compared to the current trading price of $187. While insider selling can be a negative signal, it’s important not to overemphasize it, as executives often sell shares as part of their compensation package.
Buffett’s risky move
The business side of Constellation Brands also presents challenges. The ongoing trade war has contributed to the decline in Buffett’s position. The company has guided for a 17-20% decline in sales in fiscal-year 2026, followed by low single-digit growth in the following two years.
Lower global sales and consumers trading down to cheaper brands make the case for sellers more compelling. The biggest potential upside for Constellation investors would be a quick resolution of current tariff issues and a resilient economy. However, changing consumption habits among younger generations, with existing consumers spending less on alcohol and prospective buyers showing less interest, pose a long-term challenge to sales growth.
The mixed signals from insider transactions and Buffett’s investment make Constellation Brands a complicated stock. While some investors may follow Buffett’s lead, others might heed the cautionary signs and look elsewhere.
