Buffet Acquires a Single Stock, Wall Street Experts Predict Surge Beyond 40%
Warren Buffet isn't a fan of many stocks right now, but that doesn't mean he's avoiding all of them. In fact, he added to Berkshire Hathaway's positions in five existing stocks and initiated a new position in one during the fourth quarter of 2024. And guess what? Analysts agree with his latest pick and believe it could soar by over 40% in the next 12 months.
So, which stock is Buffet bullish on? It's none other than Constellation Brands (STZ), a global leader in the marketing of beer, wine, and spirits. Berkshire bought over 5.6 million shares of this beverage giant at the end of 2024, making the position worth around $1.24 billion.
Buffet isn't new to investing in alcoholic beverages. Berkshire also owns a small stake in Diageo, which markets well-known brands like Crown Royal and Johnnie Walker whiskeys, Guinness beer, and Smirnoff vodka.
But what has analysts so excited about Constellation Brands? Well, out of the 26 analysts surveyed, 17 rate it as a "buy" or "strong buy." And the average price target for the stock is $243.80, reflecting an upside potential of 43%.
Even Bernstein, one of the most bullish investment companies out there, has a 12-month price target of $300 for Constellation, significantly higher than the average analyst's target. They believe the sell-off in Constellation's shares after the company's Q3 results in January was overdone.
But not everyone on Wall Street shares the same enthusiasm. Piper Sandler, for example, downgraded the stock from "overweight" to "neutral" and cut its price target from $245 to $200, citing tariff risks as the main reason behind their downgrade.
So, is Wall Street right about Constellation Brands? I'm not so sure.While the company has demonstrated strong growth in its beer division and has a healthy free cash flow, it also faces challenges like the potential impact of tariffs, increased competition, and regulatory risks.
But Buffet only invests in stocks when he thinks the price is right relative to the company's earnings growth prospects over five years or more. And given Constellation's position as the strongest player in the premium beer market, I believe he made a smart decision with this investment.
In short, Constellation Brands is a stock to watch, but it's not without its risks. Investors may want to wait for signs of stabilization in earnings and margin trends before considering a position in STZ.
- Buffet's latest investment strategy includes adding to existing positions in five stocks and initiating a new position in one, with Constellation Brands being the chosen one.
- Analysts widely agree with Buffet's decision to invest in Constellation Brands, predicting a potential increase of over 40% in the next 12 months.
- Berkshire Hathaway purchased over 5.6 million shares of Constellation Brands at the end of 2024, making the position worth a substantial $1.24 billion.
- Despite facing challenges such as tariff risks, increased competition, and regulatory risks, Constellation Brands' strong growth in the beer division and healthy free cash flow make it an attractive investment opportunity for seasoned financiers like Buffet.
