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.