With Warren Buffett recently announcing that he’ll be stepping down from the helm of Berkshire Hathaway (BRK.B) at the end of the year, investors are already asking some pretty difficult questions. For one, will the picks made by the Berkshire team under incoming CEO Greg Abel require Buffett signoff? And if they don’t, what will portfolio tweaks look like down the road?

For now, all investors can do is guess. That’s because so long as Buffett is at the helm during periods of uncertainty like the one we are in now, Berkshire will continue to take a slow-and-steady aproach to stockpicking. The conglomerate has been a net seller of stock for 10 consecutive quarters. 

Amid a number of share sales in the first quarter, Berkshire did announce a few small additions to its portfolio via its 13-F filing. In this filing, the company revealed it was raising its stake in alcoholic beverage maker Constellation Brands (STZ). 

Let’s dive into this move, and whether investors may want to follow Buffett’s footsteps here. 

Berkshire’s Getting More Defensive

Constellation Brands (STZ) is the parent company of a number of prominent beer brands from Modelo to Corona as well as popular wine and spirits labels. The company also aggressively explored the cannabis industry following marijuana legalization in Canada in 2018. 

However, since simmering down on its cannabis-related investments, Constellation Brands has returned to focus on its core beverage operations and has produced solid results. Berkshire appears to like these strategic moves. In the fourth quarter of 2024, the Buffett-led company bought 5.6 million shares worth $1.4 billion. Then in the first quarter, Buffett bought another 6.4 million shares for $1.2 billion. This brings Berkshire’s total stake in the company to 6.6%. 

With shares down roughly 15% in the year to date and nearly 25% over the past year, it seems Buffett saw an opportunity to buy shares of a company he likes on the dip.

The Fundamental Bull Case for Constellation Brands 

Warren Buffett doesn’t make buying decisions based solely on price action. He’s a fundamentals-first investor, constantly looking for deals among portfolio companies that he thinks have solid long-term outlooks. 

Looking at the table above highlighting some key operating metrics for Constellation Brands, it’s clear Buffett sees a valuation that is out of whack with Constellation’s growth prospects. 

Yes, Constellation Brands trades at a price-sales multiple of more than 3 times. However, this is also a stock that is trading around 15 times forward earnings, with a return on equity of nearly 30%. Those are some tech stock-like numbers. 

And with a solid book value and a reasonable debt-equity ratio for the company given its capital-intensive nature, I think Buffett is certainly onto something.

What Do Analysts Think About STZ Stock?

To put it mildly, Wall Street appears to be split on Constellation Brands. Maybe that’s what Buffett likes – a little uncertainty is what creates buying opportunities after all. If everyone saw this company as a “Screaming Buy,” it wouldn’t actually be one. 

Although the consensus Wall Street price target of $213.43 implies upside of only 14%, I am not sweating. I personally feel confident trusting Buffett’s judgement on this consumer defensive stock.