Warren Buffett isn’t one to rush into a deal. The legendary investor and CEO of Berkshire Hathaway spent most of 2024 trimming positions rather than adding to them, selling off a staggering $143 billion in equities. Yet, amidst the stock sales, Buffett and his team found six opportunities worth buying, including one standout value stock that could be a steal at current prices.
Buffett’s Recent Purchases: A Rare Buying Spree
Despite Berkshire Hathaway’s record-breaking stock sales last year, Buffett made a point to clarify that he still favors owning strong businesses over holding cash. True to his word, Berkshire spent about $2.6 billion acquiring stakes in six publicly traded U.S. companies during the fourth quarter of 2024.
Here’s a look at those six stocks and the amount Berkshire invested in each:
- Occidental Petroleum: $409.1 million
- VeriSign: $89.9 million
- Sirius XM: $296.8 million
- Pool Corp.: Estimated $70 million
- Domino’s Pizza: Estimated $470 million
- Constellation Brands: Estimated $1.3 billion
These aren’t massive blue-chip corporations with market values in the hundreds of billions. Instead, Buffett focused on smaller, high-quality businesses with strong competitive advantages, a strategy he’s long championed.
Why Constellation Brands Stands Out
Out of the six stocks Buffett picked, Constellation Brands (NYSE: STZ) appears to be the most intriguing. The company is best known for its dominant position in the U.S. beer market, particularly with its ownership of Corona and Modelo. Beer accounts for over 80% of Constellation’s revenue, making it the cornerstone of its business.
The stock has been under pressure due to several concerns:
- A proposed U.S. surgeon general warning label on alcohol
- Slowing alcohol consumption among younger generations
- Increased competition from ready-to-drink cocktails
But here’s what Buffett likely saw: a business with a well-established moat and pricing power. Despite industry headwinds, Constellation has managed to grow beer sales, with forecasts predicting 4% to 7% sales growth for fiscal 2025. Even better, management expects operating margins to expand, thanks to a focus on premium pricing.
Market Turmoil Has Created a Buying Opportunity
Buffett’s investment in Constellation came just before the company’s third-quarter earnings report. Unfortunately, those results were disappointing. A 14% drop in wine and spirits sales overshadowed the beer segment’s growth, leading management to cut full-year guidance. Then came another blow: the Biden administration announced a 25% tariff on Mexican imports, raising concerns about higher costs for Constellation.
Naturally, the stock took a hit. But here’s the silver lining—its valuation has now dropped to an attractive level.
| Metric | Constellation Brands |
|---|---|
| Forward P/E Ratio | 12.4x |
| Market Cap | $32 billion |
| Dividend Yield | 2.25% |
| Gross Margin | 50.18% |
For a company with dominant beer brands and a strong pricing strategy, a 12.4x forward earnings multiple looks like a bargain. Buffett likely sees this as an opportunity to own a high-quality business at a discount.
Individual Investors Have a Unique Advantage
One challenge Buffett faces is that Berkshire Hathaway is too big to take meaningful positions in smaller stocks. He’s said before that there are only a handful of U.S. companies large enough to truly impact Berkshire’s overall performance. That’s not a problem for individual investors.
For those looking to follow Buffett’s lead, Constellation Brands might be the most appealing pick of his latest buys. Its beer business remains strong, its valuation is historically low, and it still boasts a competitive edge in branding and distribution. If Buffett is willing to bet big on it, smaller investors might want to take notice.
