Warren Buffett’s Final Trades: Coca-Cola vs. Constellation Brands

Warren Buffett plans to step down as the CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) by the end of this year. Despite this transition, he continues to make significant trades in the conglomerate’s $285 billion portfolio. Last year, Buffett cut back on his holdings in several leading stocks—such as Apple and Bank of America—while increasing cash and short-term U.S. Treasury investments to record levels. These conservative moves suggested he believed the market was reaching unsustainable heights.

While pruning some long-term winners, Buffett acquired new stocks and maintained others. Notably, he purchased shares in Constellation Brands (NYSE: STZ), a major player in the alcoholic beverage industry. Conversely, he retained his stake in Coca-Cola (NYSE: KO), the world’s largest beverage manufacturer.

Constellation Brands: An Investment Under Pressure

Buffett initiated a position in Constellation by acquiring 5.62 million shares in the fourth quarter of 2024, followed by an additional 6.38 million shares in the first quarter of 2025. This investment totaled around 12 million shares worth $2.3 billion, representing 0.8% of Berkshire’s overall portfolio.

This investment attracted attention due to the challenges facing Constellation. The company produces over 100 brands, including popular beers like Modelo, Corona, and Pacifico, but many of these brands come from Mexico and are subject to the Trump’s administration’s 25% tariffs on Mexican goods.

Even if Constellation navigates these tariffs by adapting its supply chain or raising prices, it still confronts declining sales of its lower-priced wine offerings and reduced alcohol consumption among younger consumers. To address these shifting trends, Constellation is divesting its lower-tier wine brands while introducing lighter and nonalcoholic options. However, bearish analysts express concerns that it might face a dire situation reminiscent of the tobacco industry’s struggles.

Projected revenues for Constellation are expected to decrease from $10.2 billion in fiscal 2025 (which ended this past February) to $9.9 billion by fiscal 2028, largely due to the divestment of weaker brands. After experiencing a net loss in fiscal 2025, primarily due to significant goodwill impairment charges, Constellation anticipates returning to profitability in fiscal 2026 as it overcomes those one-time costs.

Analysts project a compound annual growth rate (CAGR) of 7% for earnings per share (EPS) over the subsequent two years as the company seeks stabilization. Although Constellation’s stock appears inexpensive at 15 times earnings and offers a forward yield of 2.1%, it must resolve urgent challenges for a potentially increased valuation.

Coca-Cola: A Steady Investment

Buffett first invested in Coca-Cola for Berkshire in 1988. Now, the company holds 400 million shares valued at $28.8 billion, translating to 10.1% of its portfolio, marking it as Berkshire’s third-largest holding after Apple (21.8%) and American Express (15.7%).

Buffett’s loyalty to Coca-Cola, which he claims to consume daily, might seem risky given the decline in global soda consumption. However, the company has diversified significantly, introducing bottled water, juices, teas, sports drinks, and energy drinks, thereby diminishing its reliance on sugary sodas. Coca-Cola has also refreshed its offerings with new flavors, sugar-free versions, and smaller sizes to appeal to new consumers.

Unlike Constellation, Coca-Cola isn’t heavily impacted by tariffs since it primarily sells concentrates and syrups, with finished products produced by a network of independent bottlers. While these bottlers might face upcoming challenges from aluminum tariffs, they can readily pivot to alternative packaging solutions.

From 2024 to 2027, analysts expect Coca-Cola’s revenue and EPS to grow at a CAGR of 4% and 11%, respectively. The stock remains reasonably valued at 25 times forward earnings and offers a forward yield of 2.8%. This stability likely explains why Buffett has held onto his shares for the past 13 years.

Investment Recommendation: Choose Coca-Cola

While Constellation brands aren’t facing imminent collapse, they do confront significantly more challenges than Coca-Cola in the short and long term. Though it may seem undervalued, Constellation risks falling into the same pitfalls as major tobacco firms, necessitating constant price hikes and cost cuts to sustain earnings growth. Therefore, if I had to choose, I would recommend sticking with Coca-Cola rather than investing in Constellation Brands.

Should You Invest $1,000 in Coca-Cola?

Before you decide to invest in Coca-Cola, consider this:

Analysts recently spotlighted their top ten stocks for investors. Surprisingly, Coca-Cola was not included in this evaluation. The selected stocks could yield substantial returns in the coming years.

It’s noteworthy that returns from past recommendations have been substantial, illustrating the potential for significant growth.

The views and opinions expressed herein represent those of the author and do not necessarily reflect the views of Nasdaq, Inc.