Warren Buffett’s love for Coca-Cola
“i’m one quarter Coca-Cola,” Warren Buffett once said in an interview. the legendary investor is famous for his stock picks but also known for his weird diet which includes a lot of junk food and five cans of cola per day.
his love for Coca-Cola began in 1985.
in a letter to shareholders, Buffett wrote: “after 48 years of allegiance to another soft drink, your Chairman, in an unprecedented display of behavioral flexibility, has converted to the new Cherry Coke. henceforth, it will be the Official Drink of the Berkshire Hathaway Annual Meeting.”
three years later Buffett decided to put his money where his mouth is.
in 1988 he bought Coca-Cola stock worth $1 billion just months after the 1987 market crash, and since then the company continues to be a major part of his portfolio. as of June, Coca-Cola made up 7.39% of his portfolio at a valuation of $21.7 billion.
but it wasn’t just his love for soda that made him place such a huge bet on the company.
during the 1987 crash, Coca-Cola’s valuation also plummeted. it was a classic example of a good company going through a tough time.
Buffett saw that Coca-Cola had the biggest market share in the beverage industry at the time and a huge potential to grow in the overseas market. at present, it sells beverages in 200 countries under 500 brands.
explaining his investment rationale, Buffett wrote to shareholders in 1988: “we expect to hold these securities for a long time. in fact, when we own portions of outstanding businesses with outstanding managements, our favourite holding period is forever.”
Coca-Cola also has a steady cash flow and pays out its profits as dividend generously. another characteristic of a company that Buffett looks out for before investing.
in 1994, Buffett bought more shares of Coca-Cola and at present holds 400 million shares in the company. since the day he bought the stock, he hasn’t sold a single share.