Warren Buffett Just Sold 1 Stock Up 196% Over the Past 3 Years and Piled Into Another Stock Down 25%. What Is He Thinking?

Warren Buffett and his team at Berkshire Hathaway continued their streak of selling more stocks than they bought in the 2025 first quarter, building up the company's cash pile to more than $347 billion. They sold eight stocks, including closing two positions. One of those was the struggling Citibank and the other was Nu Holdings (NYSE: NU), a soaring growth stock that's up 196% over the past three years.

However, they still found seven stocks worthy of buying in the quarter, although they didn't start any new positions. Of particular interest was ramping up their position in Constellation Brands (NYSE: STZ), which is down 25% over the past three years. This could look like a value trap to the amateur investor, but Buffett clearly sees it as a buying opportunity.

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Let's see why Buffett might be thinking that it's time to sell Nu, a high-growth stock, and buy Constellation Brands, which is down in the dumps.

Image source: The Motley Fool.

Buy low, sell high

Buffett is the classic contrarian investor, meaning he goes against what the rest of the market is doing. But he employs the classic investing method of buying low and selling high. He has explained many times over the years that it doesn't make much sense to buy stocks at highs or sell them at lows. He looks to buy when everyone else is selling, and prices are down, and he aims to sell when the market is enthusiastic, and prices are high.

His most famous quote about this encapsulates this idea: "We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

Berkshire Hathaway invested in Nu, a digital bank, in a funding round just before its initial public offering in 2021, and it's done very well with this investment. However, it's not the holding company's typical stock pick. Buffett doesn't usually invest in young growth stocks, and he's not a big fan of technology.

Nu still has massive growth opportunities. It's proven extremely popular in its headquarters of Brazil, where it already has 59% of the population as members and continues to grow at a high rate, and it's just getting started in Mexico and Colombia. It's highly profitable and consistently reports strong growth.

What might be motivating Buffett to sell right now is the risk. Brazil has a high inflation rate, and Nu is feeling that right now it has increased provisions for losses and higher interest expenses. That, along with building out its business in Mexico and Colombia, is putting pressure on its margins. Being a proponent of the buy low, sell high philosophy, which underpins most successful investing, Buffett and his team might see this as an opportune time to move on to stable stocks that are more in line with their value approach to investing.

Considering the deeper investment in Constellation Brands, as well as the other stocks Berkshire Hathaway extended its position in, there might be other factors at play, too.

An anchor in stormy seas

Buffett doesn't usually explain why he buys or sells stocks, and on rare occasions, he'll praise what he likes about a particular stock. But he freely gives advice about general investing, and that can give some clues about his own trades. He often talks about well-established businesses and strong brand names, and the investment in Constellation Brands, as well as the pullback from Nu, make sense if you understand what Buffett prizes.

Constellation Brands makes alcoholic drinks under well-known labels like Corona beer and Casa Noble tequila. These are products that are always in demand, and the established brand names create a competitive advantage. Constellation Brands has reported lackluster growth over the past few years, but Buffett has his eye on the long term. He might also be considering the current uncertain economy and volatile market. It's more important in these times to hold onto secure stocks that can weather stormy seas.

It also pays a growing dividend that yields 2.2% at the current price. Buffett loves dividends because they imply financial strength, stability, and a commitment to shareholders. On top of that, Constellation Brands stock looks cheap at today's price. It trades at a forward, 1-year P/E ratio of 13 and a price-to-cash flow ratio of 17, which is an attractive valuation.

Constellation Brands stock likely won't appeal to the growth investor, but there would be long-term upside at the current price, and it offers the stability that features in most of Buffett's stocks.

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Citigroup is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in Nu Holdings. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Constellation Brands and Nu Holdings. The Motley Fool has a disclosure policy.