Warren Buffett is one of the most widely followed investment managers in the world. And there's good reason for that. His 60-year run at Berkshire Hathaway (BRK.A 1.08%) (BRK.B 1.14%) has been nothing short of phenomenal. Investors who followed Buffett into the company have realized a compound average annual return of about 20% since Buffett took over the business in 1965. That's nearly twice the average annual return of the S&P 500.
But it appears that Buffett has struggled in recent quarters to find great ways to deploy Berkshire's growing cash reserves. His potential best opportunities are getting only a small amount of capital infusion, as it appears that he's determined that many of the best large-cap stocks are overvalued. As a result, Berkshire put only $3.2 billion of cash into equities in the first quarter, leaving about $347 billion in cash and Treasury bill investments.
Some of that $3.2 billion went into an undisclosed stock exempted from disclosure by the Securities and Exchange Commission. The rest, which appears to be about $1.8 billion, went into seven different stocks reported on Berkshire's quarterly 13F filing.
One of those stocks stands out as an incredible value for investors right now, and it could be worth adding to your portfolio.
Image source: The Motley Fool.
Here are the seven stocks Buffett just bought
Buffett admits he would love to buy more stocks. "Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned," he wrote in his letter to shareholders in February. But for Buffett to buy shares in a company, they must be offered, and offered at good value.
Evidently he saw only a handful of stocks that looked like good values last quarter. Here are the seven Berkshire has disclosed so far:
- Heico
- Verisign
- Sirius XM
- Pool Corp.
- Domino's Pizza
- Constellation Brands (STZ +1.89%)
- Occidental Petroleum
It's worth pointing out that all of these businesses are relatively small. Occidental Petroleum sports the largest market cap of the group at $42 billion. And Berkshire already owns nearly 27% of that company.
Buffett doesn't see a lot of opportunities for Berkshire to invest tens of billions in a great company trading at a fair value. With Buffett strategically selling off some holdings while Berkshire's subsidiaries generate considerable free cash flow, the cash is piling up.
Everyday investors can invest as much money as they want in any of the seven companies above. But some of them are arguably better values than others, especially considering price movements since Buffett's purchases, some of which date all the way back to early January. Of the seven, there's one that looks like a particularly good value right now.
NYSE: BRK.B
Key Data Points
Here's the best of the bunch
All seven companies are great businesses. Each has at least one source of competitive advantage, and they generally trade for good value relative to earnings. But if I had to choose one of Buffett's latest purchases to invest my own money in, it would be Constellation Brands.
Constellation Brands is the owner of top Mexican beer brands like Corona and Modelo. It absolutely dominates U.S. sales for Mexican lagers. It also owns several wine and spirits brands, although its portfolio got a little bit smaller when it divested its mainstream wine brands earlier this month. Constellation is refocusing its portfolio on high-end brands. The beer business is its most important, accounting for over 80% of sales and over 90% of operating income in fiscal 2025.
It has a stranglehold on the Mexican beer import category in the U.S. The company said it accounts for over 90% of spending in the segment. And it's seen strong growth in sales for both Modelo and its smaller Pacifico brands over the past year, despite secular headwinds against the overall beer category. Total alcohol consumption appears to be declining, especially among younger generations, and new entrants like hard seltzer and ready-to-drink cocktails continue to eat into beer's market share.
Those headwinds and a new tariff this year on Mexican imports into the United States have led many investors to sell the stock. A disappointing earnings report in January didn't help, either. The stock currently trades more than 20% below where it started the year.
NYSE: STZ
Key Data Points
But the outlook for the business is strong. Management expects sales growth in the low-single-digit range over the next three years as the wine and spirits business continues to drag down the beer business. Strategic divestments over time could refocus more of the business on higher-margin and growth opportunities. Overall, management also expects its operating margin to expand 1 to 2 percentage points from last year's levels by 2028.
The expected net result is $6 billion to $7 billion in free-cash-flow generation over the next three years, and management has earmarked about $4 billion of that for share repurchases. That would reduce its current share count by over 13% at its current price. Management forecasts it'll buy up about 9% of shares outstanding over the next three years, with expectations that the price of the stock will rise.
Given the resilience of Constellation's beer brands and management's focus on capital returns and high-margin opportunities, investors should see strong earnings growth after adjusting for divestments. Nonetheless, the stock trades for less than 14 times forward earnings estimates. That makes it worth considering as an addition to any value investor's portfolio right now.
