Warren Buffett’s Berkshire Hathaway spent $2.6 billion buying six different stocks in the fourth quarter of the previous fiscal year. The purchases include Occidental Petroleum for $409.1 million, Sirius XM Holdings for $89.9 million, VeriSign for $296.8 million, Louisiana-Pacific for an estimated $70 million, Domino’s Pizza for an estimated $470 million, and Constellation Brands for an estimated $1.3 billion. Buffett noted that finding appropriately priced value stocks in the current market remains challenging.
The selected companies’ market capacities constrain Berkshire Hathaway’s investment size. Constellation Brands has been identified as an exceptional value stock among the recent acquisitions. The company is the largest brewer of Mexican beer, with brands like Corona and Modelo leading the market in the U.S. Its beer division accounts for over 80% of its sales and operating income.
Berkshire’s stock acquisitions scrutinized
Constellation Brands has successfully deployed a “premiumization” strategy, positioning its beer brands as premium options. Their scale affords them a competitive advantage in both ad spend and brand reinforcement, sustaining their dominance and premium pricing in the market.
Before Buffett invested in Constellation Brands, the company reported a mixed third quarter, with wine and spirits sales plummeting by 14%, offsetting growth in the beer segment. New tariffs on Mexican products have also contributed to some short-term pressure on the company’s stock. Despite these challenges, the company’s long-term strength remains robust.
The stock currently trades at just 12.4 times forward earnings estimates, presenting a compelling value given its strategic advantages and market positioning. Constellation Brands is arguably Berkshire Hathaway’s best recent stock purchase and a strong candidate for any value-driven investment portfolio.
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