In times of stock market declines, investors often find reassurance in the relatively stable portfolio turnover of Warren Buffett’s Berkshire Hathaway. This company has maintained significant investments in various stocks for extended periods. Buffett’s exceptional investing history stems from his ability to seize favorable opportunities and maintain focus on the intrinsic value of businesses during Wall Street tumult.
In the fourth quarter, Berkshire Hathaway increased its holdings in Constellation Brands (NYSE: STZ), Pool Corp (NASDAQ: POOL), and Domino’s Pizza (NASDAQ: DPZ). Here, three contributors from Fool.com share their insights on these investments.
Constellation Brands
Jeremy Bowman notes that Berkshire’s investment strategy typically leans toward established companies with strong business frameworks and competitive edges. A surprising addition was Constellation Brands, which has long been recognized for popular beers like Corona and Modelo. Although the stock saw significant gains a decade ago, it has recently faced challenges, including a sharp decline following disappointing earnings.
Despite these challenges, the stock is currently viewed as undervalued, trading at a forward P/E ratio of only 13 and offering a 2.3% dividend yield. Constellation Brands exhibits characteristics typical of a Buffett value investment, with its strong brand portfolio and healthy operating margins. However, slow industry growth and external tariffs are potential obstacles ahead.
Pool Corp
Jennifer Saibil expresses that Berkshire’s acquisition of Pool Corp is unexpected but aligns with Buffett’s investment approach, given its dominant market position and high profitability without the need for significant growth investments. The company provides a growing dividend yield of 1.5% and holds a leading status in the pool product distribution industry, serving various sectors worldwide.
Domino’s Pizza
John Ballard remarks that Berkshire initially bought 1.28 million shares of Domino’s Pizza and later increased its stake further, indicating confidence in continued returns. Domino’s has shown resilience, growing retail sales despite the industry’s challenges, thanks to its strong brand and franchise business model, which minimizes capital investment. With outstanding returns on capital employed, Domino’s remains an attractive choice for Buffett and a consistent performer in terms of revenue.
Before considering investment in Constellation Brands, it’s worth noting that the Motley Fool’s Stock Advisor team has identified ten stocks they believe to have greater potential, with Constellation not making the cut. Historical recommendations, such as Nvidia, have yielded significant returns, emphasizing the importance of choosing stocks wisely in the current market environment.
