Should You Join Buffett and Invest in Constellation Brands?
The consumer staples sector has entered the chat. Over the past five trading sessions, while tech sells off, the market’s been rotating away from growth and into defensive sectors, which were previously left out of the S&P 500’s recovery. In the past week, consumer staples (0.71%), real estate (1.16%), and healthcare (3.16%) have led the way.
Inflows into defensive sectors could raise questions about how firm this rally’s footing is. But it could also suggest that the rally has legs and now spans all sectors. Of course, if the former proves to be true, holding defensive names isn’t the worst place for your portfolio to be.
That’s exactly what we saw when Warren Buffett’s Berkshire Hathaway Stock (NYSE: BRK.B) Q2 13F filing was made public on Aug. 14. The form revealed that the firm expanded its position in Constellation Brands (NYSE: STZ), a global alcoholic beverage producer and distributor, bringing its total holding to 13.4 million shares.
Alcoholic Beverages Can Weather Most Storms
Having consumer staples join the ongoing rally isn’t necessarily an indication that investors should be looking to insulate their portfolios with all-weather positions (though that’s never bad advice). However, when it comes to the sector, its inelastic demand plays a role in both good and bad markets.
Constellation Brands’ marquee products—including Corona, Modelo, Kim Crawford, and Robert Mondavi—may not seem like staples. Try telling that to parents of young children. According to Grand View Research, the global alcoholic beverage industry was valued at $1.762 billion in 2024. It’s expected to reach $3.015 trillion by 2030, good for a compound annual growth rate (CAGR) of 9.7%.
Alcohol consumption may be marginally decreasing in the United States, but North America accounts for just 33.5% of the global market (and is still expected to undergo a CAGR of 9.3% from 2025 to 2030). Beyond staples like beer, wine, and spirits, Grand View Research notes rising demand for “affordable, value-added hard seltzer types.” The hard seltzer market alone is projected to grow at a CAGR of 15.8% from 2025 to 2030. Additionally, the consultancy firm finds “increasing demand for artisanal spirits in developing markets like China and India,” the two most populous countries on Earth.
So it’s unsurprising that Berkshire Hathaway has been significantly increasing its stake in Constellation Brands. In Q1, it added 12 million shares, more than doubling its position. That move made the Buffett-led firm’s position approximately 6.6% of STZ’s entire market cap. Then in Q2, Berkshire again increased its stake by 11.6%. That translated into 1.39 million additional shares, bringing its total holding to 13.4 million shares valued at $2.210 billion.
What About Constellation Brands Caught Buffett’s Eye?
Buffett is synonymous with value investing, and that’s what Constellation Brands is currently offering investors. The stock is down 26% YTD, but until recently, it traded in a range between $208 and $272 from December 2020 to December 2024 while continuing to reward shareholders with a growing dividend.
A quick note on that dividend: Constellation Brands has increased its payout for nine consecutive years, with a five-year average growth rate of 6.00% and an average 10-year growth rate of 13.67%. So even when the stock is underperforming, it pays shareholders to be patient.
And underperformance is likely what Buffett saw in STZ. After falling out of that trading range last December, the stock’s down more than 31%. At the same time, it’s exhibited healthy financials while remaining a favorite among smart money. Institutional ownership stands at 77.34%.
When Constellation Brands reported its FY 2026 Q1 earnings on July 1, it announced consolidated net income of $523.8 million following a loss of $370.6 million in Q4 2025—a strong indication of operational improvements. The company’s PP&E investments for the quarter were $192.8 million, suggesting long-term growth. Meanwhile, free cash flow increased from $879.7 million in FY 2018 to $1.973 billion in FY 2025, good for an increase of 124.28%.
The stock’s currently trading at an incredibly cheap forward P/E multiple of 13.00.
A Favorable Technical Setup
Beyond sound financials, Constellation Brands is showing a promising technical setup. Relative Strength Index (RSI) currently reads 39.03 and continues trending towards oversold territory. Meanwhile, the stock is testing support in the $164 area, where it meets a long-term uptrend demonstrating higher lows:
If STZ can bounce from that support, it could run up to resistance around $194, implying 18.29% potential upside in the near term. Longer term, Wall Street looks even more bullish. Twenty-four analysts assign an average 12-month price target of $213.74, or nearly 30% higher than where the stock trades today.
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