Warren Buffett Going Out With a Bang. 2 Stocks He Just Doubled Up On

Warren Buffett, despite stepping down as Berkshire Hathaway's CEO by year-end, increased his positions in Constellation Brands (STZ) and Pool (POOL) during Q1 2025, signaling confidence in their long-term value. Specifically, Berkshire increased its stake in Constellation Brands by 113.5% and Pool by 144.5%, drawn to their strong fundamentals and undervalued status despite recent market challenges; Constellation Brands has a strong portfolio of premium brands, while Pool is the world’s largest wholesale distributor of swimming pool supplies and outdoor living products.

Analysis

Warren Buffett, despite announcing his departure as Berkshire Hathaway CEO by year-end, has continued his value investing strategy by significantly increasing stakes in Constellation Brands (STZ) and Pool Corp (POOL) during Q1 2025. Berkshire Hathaway boosted its Constellation Brands holding by 113.5% to over 12 million shares, valued at approximately $2.2 billion. This decision appears driven by STZ's portfolio of premium brands like Modelo and Corona, its dominance in the U.S. imported beer market, and an apparently undervalued position highlighted by a forward P/E ratio under 15 and a price-to-free cash flow ratio of 17. This undervaluation persists despite a reported 14% stock decline in 2025 due to tariff concerns and a significant $2.25 billion goodwill impairment; notably, STZ generated $1.9 billion in free cash flow in fiscal 2025 and offers a 2.2% dividend yield. Simultaneously, Berkshire increased its Pool Corp stake by 144.5% to 1.46 million shares, valued at $470 million. POOL's attraction likely stems from its status as the largest global wholesale distributor of swimming pool supplies and a resilient business model where 65% of its $5.3 billion in 2024 net sales derive from recurring maintenance revenues. This provides stability despite a post-pandemic slowdown and an approximate 15% decline in new pool construction, with its stock trading 22% below recent highs. POOL's consistent dividend history, with 15 consecutive years of increases, further aligns with Buffett's investment criteria, even though the most recent hike was a modest 4%.

Key Decisions for Investors

• Investors should evaluate Constellation Brands, noting Berkshire Hathaway's substantial Q1 2025 investment at what appears to be a discounted valuation amid tariff concerns and a goodwill impairment, considering its strong brand portfolio and robust fiscal 2025 free cash flow.
• Consider Pool Corp's long-term appeal due to its dominant market position and significant recurring revenue from maintenance, which likely underpins Buffett's increased Q1 2025 investment, while remaining mindful of the current headwinds from reduced new pool construction and a slowing dividend growth rate.
• Recognize these acquisitions as indicative of Buffett's enduring value philosophy, potentially highlighting undervalued opportunities in companies with strong fundamentals and competitive moats, even as he prepares to transition from his CEO role.