This Overlooked Warren Buffett Stock Is Absurdly Cheap Right Now

Constellation Brands (NYSE: STZ) has struggled in recent years as consumers have focused increasingly on health. Older consumers seem to be drinking less, and younger consumers have sworn off alcohol in higher numbers than in past generations.

Amid that stock sell-off, Warren Buffett's Berkshire Hathaway took a significant interest as a probable contrarian play. Indeed, given an enduring consumer trend, the consumer discretionary stock could be poised for a comeback.

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Hope springs eternal

At first glance, conditions appeared to worsen for the alcohol company. Net sales plunged 51% in fiscal 2026 (ended Feb. 28) for wine and spirits amid the divestiture of Svedka and several wine brands. Also, even for the beer brands that generate 91% of the company's revenue, revenue also dropped by 3%, prompting a 10% overall drop in sales.

Still, Buffett has become famous for contrarian bets, and this mindset could pay off with Constellation Brands. Despite an aforementioned focus on health, the popularity of alcohol goes back thousands of years, according to numerous studies. Buffett tends to like companies whose products have durable demand, and investors are seeing signs that alcohol consumption is not going away.

Constellation Brands has capitalized on such trends with these divestitures and a renewed focus on its Mexican beer brands, such as top-selling Modelo, Pacifico, and Corona beer. It has also welcomed incoming CEO Nicholas Fink, who took the helm of the company on April 13.

Investors seem to like what they see, as the stock has moved steadily higher since November, and the earnings report for the fourth quarter of 2025 reinforced the growing interest. Despite the sales drop, Modelo has maintained its No. 1 position in the market.

Also, a $2.8 billion impairment charge from fiscal 2025 rolled off its books. This allowed net income in fiscal 2026 to rise to almost $1.7 billion, up from the $81 million loss in the previous fiscal year.

This is significant because Constellation is still able to fund its $716 million in dividend costs. That payout, which is now $4.12 per share annually and yields 2.5%, has risen every year since 2015.

Moreover, the company announced the completion of a $924 million share buyback, reducing the supply of shares and increasing the stock's value. Additionally, it expects flat sales growth at the midpoint in fiscal 2027, which is an improvement over last year's sales decline.

Finally, Constellation trades at a P/E ratio of 17, far below the S&P 500 (SNPINDEX: ^GSPC) average of 29. That low valuation could persuade investors to lift a glass to Constellation Brands' stock.

Constellation Brands' stock is a buy

After years of struggle, Constellation Brands' stock appears poised for a recovery.

Although sales have struggled, investors should remember that alcohol is unlikely to go away entirely. Moreover, under challenging conditions, Constellation has proven that it can earn a profit, fund its increasing dividend, and repurchase shares under such conditions.

Assuming these trends can continue, Buffett's contrarian instincts could make investors richer with Constellation Brands stock.

Will Healy has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.