Warren Buffett is so deeply tied with Coca-Cola that one of his most personal anecdotes--that he at one time drank five cans of Cherry Coke each day--is forever linked with the company. Buffett added Coca-Cola stock to Berkshire Hathaway's portfolio after the stock market crash of 1987, buying up $1 billion or so in stock at a time when prices were generally low. Since then, Buffett has maintained and bolstered his position. Now, Berkshire holds nearly 10% of all outstanding shares of the company, making it one of his largest holdings and a consistent provider of strong dividends. If you had bought into Coca-Cola at the same time Buffett did, how much would your investment have gained at this point?
Also read, Coca-Cola Using Data to Generate Product Ideas.
From $2.45 in Early 1988 to $45.03 Today
Warren Buffett saw Coca-Cola (KO)as a dominant company across the beverage industry even back in the late 1980s. Following the crash of 1987, Buffett found many different stocks to have more attractive valuations, considering that many owners were selling off shares without attention to fundamentals. Besides that, Buffett saw KO as having an iconic name and brand as well as a far-reaching global exposure. These were some of the reasons he invested about $1 billion in the company in early 1988. This purchase accounted for about 6.2% of all outstanding shares and immediately catapulted KO stock to the top of Buffett's holdings. In January 15, 1988, KO stock sold for $2.45 per share.
Today, KO stock is worth about 18.4 times what it was when Buffett made his famous purchase in 1988, with shares selling for $45.03 each, accounting for dividends. The stock has produced annualized gains of more than 11% since Buffett first invested. If you had followed Berkshire Hathaway's KO purchase in 1988, you would have seen your investment grow each year since then. According to the Coca-Cola company, your investment of $1000 alongside Buffett would have bought you approximately 408 shares in 1988. It would now be worth more than $18,500, for a percentage change of just over 1,749%.
Buffett Looks to Hold on to KO Indefinitely
Coca-Cola has stood out among the other positions in Berkshire's portfolio not only because of the amount of money Buffett has invested, but also for its longevity. Alongside Wells Fargo (WFC), Coca-Cola is one of the two longest-standing major positions in Buffett's portfolio. It is a cornerstone of Buffett's holdings and a key component of his reputation as a long-term investor who prefers to find excellent companies and hold them for a very long time. To this day, Buffett remains a loyal personal customer of Coca-Cola, and the company's brand name is as strong as it has ever been.
Coca-Cola sports about 20 different brands, bringing in a total of over $1 billion in sales per year a piece. Coupled with a huge and extremely efficient network of distribution, a superb balance sheet, comfortable cash flow, and strong management, Coca-Cola seems to be as close to a surefire investment as one can find.
SOURCE Nathan Reiff, Investopedia
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