If you missed the news that Warren Buffett’s Berkshire Hathaway (BRK-A, BRK-B) recently acquired 5.6 million shares of Constellation Brands (STZ) for a bit north of $1 billion, you’re not alone.
The stake was disclosed in Buffett’s latest 13F filing, which was made in mid-February and was swallowed up by headlines about the market sell-off, tariffs, etc.
What’s notable about Buffett’s Constellation buy is that Berkshire has been a net seller of stocks, building up a massive cash hoard, and selling everything from parts of his Apple (AAPL) stake to his S&P 500 ETFs.
In fact, at the end of 2024, Berkshire Hathaway was sitting on a record-high $334 billion in cash.
Not only that, but the buy of Constellation was the only newly initiated position in the portfolio.
At the same time, insiders at Constellation Brands have been selling shares of the company for the last year.
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In the last 12 months, there have been a total of 42 insider transactions in STZ, only 10 of which were buys.
The net result of those trades has been the sale of 569,000 shares of STZ, or $106 million at the current prices, with the largest single transaction being a $29 million sale by Robert Sands, a director at the company.
Both transactions are undoubtedly “smart money” moves, as Buffett is a living investing legend (there’s a Berkshire Hathaway Portfolio Tracker on CNBC for a reason), and arguably no investors have a better understanding of a company’s fortunes than the insiders.
So, as retail investors, where should we land on this transaction? Is it a buy-low signal because of Buffett, or is it a stay-away signal because of the insider selling?
Early results are very much in favor of the insiders, as Berkshire’s average price is 239.50, well ahead of the last trade at 187, which means Buffett’s stake has lost 21.9% since it was initiated.
At the same time, it cannot be overstated how important it is to avoid putting too much emphasis on insider selling.
Highly paid executives frequently receive stock and options as part of their total compensation, and selling by those executives is often just a way for them to convert that equity stake into cash.
Of course, it’s unlikely that Sands divested a $29 million position to pay for a child’s graduate school or cover his country club membership dues, but he may have simply been overweight shares of the company that signs his paycheck.
In general, investors should view insider buying (in the open market, paying out of pocket, not exercising options they receive as compensation) as a major net positive and insider selling as a possible negative.
On the business side of the equation is, of course, the growing challenge of operating an international alcoholic beverage company against the backdrop of an ongoing trade war that has been largely responsible for the aforementioned 21.9% haircut that Buffett has already taken in the stock.
In the firm’s latest full-year earnings release in April, the company guided for a 17-20% decline in sales in fiscal-year 2026 followed by low-single-digit growth (flat to 3%) in fiscal years 2027 and 2028.
So, while alcohol is a defensive business, lower global sales plus consumers that were already drinking less (and could trade down to cheaper brands if the economy heads south) is, in my mind, another point in favor of the sellers.
The biggest possible upside for Constellation investors would seem to be a quick reversal of the ongoing tariff debacle and an economy that remains resilient.
That’s impossible to discount entirely, but, given the broader consumption trends among young consumers (drinking less and more likely to abstain from alcohol entirely), it’s hard to make a strong case for sharing a Corona with “Uncle Warren” and buying STZ.
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