2 Warren Buffett Stocks I Wouldn't Buy

Globe and Mail

21-05-2025

Warren Buffett is a brilliant investor and, arguably, the most popular one in the world. His company Berkshire Hathaway invests in many blue chip stocks, but investors shouldn't assume that all of Berkshire's holdings are great buys. A closer look reveals that there are some considerable concerns with some of them.
There are a couple of stocks in Buffett's portfolio that I wouldn't buy now or anytime soon -- Kraft Heinz (NASDAQ: KHC) and Constellation Brands (NYSE: STZ). While they may provide some dividend income, you may be better off steering clear of them.
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Kraft Heinz
Kraft has some solid consumer brands in its portfolio, including Oscar Mayer, Jell-O, Philadelphia, and many others. However, the business has been struggling to grow. While there have been periods of positive growth, the overall trajectory over the past five years hasn't been encouraging, as you can see from the chart below.
KHC Operating Revenue (Quarterly Year-Over-Year Growth) data by YCharts.
Last year, the food company's revenue totaled $25.8 billion -- less than the $26 billion it reported back in 2021. While there is some stability in the company's operations, growing sales has been challenging. And with a greater focus by the current government on healthier food options and GLP-1 drugs curbing appetites, things may not get any easier for Kraft. There are some big question marks about whether its products will remain in strong demand in the years to come.
Kraft has lost more than 10% of its value over the past five years but could make for a compelling option for income investors, as it yields 5.8% -- a mouthwatering payout when you consider that the S&P 500 's yield is only 1.3%. However, if the company has an uncertain future ahead and its earnings deteriorate, the dividend may not be all that safe.
I'm not sure why Kraft is still among Berkshire's top 10 holdings and the investment hasn't been eliminated or at least drastically reduced by now. But it's not a stock I'd be hanging on to, as Kraft's future is questionable.
Constellation Brands
One stock that Buffett has been recently bullish on is Constellation Brands. He started buying it last year and recently doubled his position in the beer maker.
I can understand Buffett's logic a bit more on this one than with Kraft. Beer generally is always in demand, whether economic conditions are strong or not. Constellation has some popular brands, including Corona and Modelo, which help it fit into the Buffett mold of investing in businesses with strong competitive moats.
However, tariffs are currently a big risk to the business these days, as Constellation makes its beers in Mexico. President Trump imposed a 25% tariff on imports from that country earlier this year.
I don't think that's a huge consideration for Buffett as he doesn't make investment decisions based on economic outlooks and instead focuses on the long-term picture. But even that looks troubling when you consider the health risks involved with alcohol consumption. There are a growing number of reports that have found that alcohol raises the risk for developing multiple types of cancers, and that there may not be a safe amount to consume.DJ: adjusted this as the focus wasn't to be on the surgeon general themselves but the health-related risks JM: I think this was the former surgeon general. Wonder if the new surgeon general has different views?
For now, Constellation's business has been generating far better growth than Kraft. In its most recent fiscal year, which ended on Feb. 28, Constellation's net sales came in at $10.2 billion, which was a modest 2% improvement from the previous fiscal year. Over a three-year period, sales have risen by 16%.
But that still isn't terribly impressive growth. And as with Kraft, my concern is that the future may lead to more challenges for Constellation to grow its top line, especially as consumer health concerns about alcohol may weigh on the demand for the company's products.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Constellation Brands and Kraft Heinz. The Motley Fool has a disclosure policy.