Constellation Brands Stock Hasn't Been Trading This Low Since 2020. Is Now the Time to Buy?

The beer business is usually a good business to be in. I used to work for a brewery and was amazed when I saw the company's financials looking as strong as they were, especially given how unimpressive the management team was.

It was then I realized products can sell themselves, regardless of how good or bad management is. Billionaire investor Warren Buffett once said: "I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will."

The beer business can be wonderful as long as the brands and products are good. But things haven't been wonderful of late for Constellation Brands (NYSE: STZ), a company that Buffett's Berkshire Hathaway holds a position in.

There isn't anything wrong with its products, but tariffs and government policies have hurt its growth. And now, the stock is trading around multi-year lows. Could this be an ideal time to invest?

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Constellation is having a tough year

This year, Constellation Brands has lost more than one-third of its value. The U.S. government has imposed tariffs on many countries, including Mexico, where Constellation Brands imports virtually all of its beer from. Crackdowns on immigration have also been affecting the company's Hispanic customers.

This hasn't translated well in the company's financial performance this year. For the six-month period ended Aug. 31, net sales came in at right around $5 billion, down more than 10% from the same period last year.

The good news is that because it incurred a goodwill impairment charge of nearly $2.3 billion a year ago (and it didn't this time around), its net income has actually improved on a year-over-year basis. It has gone from a $289.6 million loss over the first two quarters a year ago, to a profit of just over $1 billion during the past six months.

But the stronger profit numbers haven't been able to keep the stock from crashing in value this year.

The last time the stock was this low was during the COVID crash

Not only has Constellation's stock plummeted to new lows for the year, but it also hasn't reached these levels since 2020 when the market crashed due to the pandemic. That decline was brief, however, and the stock would end up recovering quickly.

If you skip over 2020, then you have to go as far back as 2015 for the last time it was below its current levels for a prolonged period. And at that time, the stock was trending upward.

Unfortunately, there's no immediate reason to believe that Constellation's stock will turn things around as quickly as it did during the 2020 crash. Tariffs and trade wars have been a big concern for investors this year, and that likely isn't going to change anytime soon. Even though the stock looks significantly discounted, it's entirely possible that it goes lower in the weeks and months ahead.

Should you go against the grain and buy Constellation's stock?

Just like Buffett says to buy idiot-proof businesses, he also talks about buying when others are fearful. With Constellation's stock, there's a fair bit of fear around its operations, and you can see that in its crashing share price.

But at the end of the day, this is a company that has many excellent brands in its portfolio, including Modelo and Corona. I believe the business will recover, and that while crackdowns on immigration may be a concern right now, that likely won't be the case over the long haul.

As long as you're willing to say invested for at least five-plus years, I think this can be a good contrarian stock to buy and hold. The core business still looks strong, and the stock's deeply discounted price can provide you with a good margin of safety.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.