Why Buffett’s Buying This Beer Stock

In the second quarter, Warren Buffett quietly added nearly 1.4 million shares of Constellation Brands, bringing Berkshire Hathaway’s total stake to roughly just shy of $2 billion.

That’s a bold move at a time when the entire alcohol industry is facing a slump in consumption. But if history is any guide, Buffett tends to buy when sentiment is sour and value hides in plain sight.

Key Points

• Buffett expanded Berkshire’s $1.9 billion stake in Constellation Brands, betting on its portfolio of premium labels like Corona, Modelo, and Kim Crawford.

• Constellation’s strong Gen Z following and cash reserves could let it outlast the slump and scoop up undervalued brands.

• With steady free cash flow, a 2.9% dividend, and shares trading at just 20× earnings, STZ looks cheap for a Buffett-quality business.

Betting on a Rebound in Alcohol Consumption

The timing of Buffett’s latest buy may look puzzling given the macro backdrop. Alcohol consumption in America has fallen to its lowest level in decades, with a recent Gallup poll showing that just over half of adults now drink, down sharply from historical norms. Younger generations in particular are cutting back, driven by health concerns and tighter budgets.

Financial Strength in a Weak Environment

Despite industry headwinds, Constellation remains profitable and cash-flow positive — a hallmark of Buffett-approved businesses. In its fiscal Q2 2026 results, the company reported $2.5 billion in revenue and $638 million in net income.

Over the trailing 12 months, it maintained a 13% net margin and a 16% return on equity. Free cash flow for the first half of the year came in at $1.1 billion, underlining its ability to weather temporary storms while still rewarding shareholders through dividends and buybacks.

At a time when weaker peers are retrenching, Constellation’s balance sheet and steady cash generation could let it acquire smaller brands at attractive valuations, a move that often sets the stage for outsized long-term gains.

Why Buffett Keeps Buying

Constellation now trades around 20 times trailing earnings and 13 times operating cash flow, levels that suggest much of the bad news is already priced in.

Analysts see about 23 percent upside from current prices, with a consensus target near $173 a share.

For Berkshire, whose average cost basis sits around $205, the position is currently underwater — but that hasn’t stopped Buffett from buying more. That persistence signals conviction, not hope.

It also fits his timeless strategy: buy wonderful businesses facing temporary problems. Constellation’s enduring brands, strong cash generation, and shareholder-friendly capital returns, including a 2.9 percent dividend yield and a $4 billion buyback authorization — make it exactly the kind of company Buffett has held for decades.

The Bottom Line

Buffett’s growing stake in Constellation Brands is a vote of confidence that short-term consumption dips won’t derail a long-term compounder.

For patient investors, the current slump could represent an opportunity to own a premium brand portfolio at a discount. Constellation may not deliver fireworks overnight, but its combination of global brands, financial strength, and Buffett’s backing makes it a name worth watching, and perhaps owning, for the next cycle.