Warren Buffett Has Held This Stock for Over 34 Years — Why He Will Never Sell
Nov 23rd, 2022 10:56 EST
Warren Buffett — the Oracle of Omaha — is widely regarded as one of the greatest investors of all time.
Berkshire Hathaway Inc. (NYSE: BRK-A) has returned tens of thousands of percent over the years and consistently outperforms the market. Buffett purchased the company for just $8.3 million in 1965, and it’s now valued at nearly $700 billion, roughly a 10 million percent return.
But one of Buffett’s top all-time picks and longest-held positions is one you might not expect. Berkshire Hathaway first started buying Coca-Cola Co. (NYSE: KO) stock in 1988 and continued accumulating shares since. Berkshire Hathaway now owns 400 million shares of Coca-Cola stock valued at a whopping $22 billion or about 8% of the company.
In the 1988 time period that Buffett began purchasing the company, the stock was sitting at a few dollars per share, so Berkshire Hathaway is sitting on massive gains in the company. Coke also issues a dividend worth 44 cents per quarter, so he gains nearly $1 billion per year in dividends on top of that.
While you’re unlikely to see those kinds of returns in Coca-Cola stock anymore because of its size, there are still value picks in the industry. For example, TruBrain is a startup that creates drinks and supplements focused on cognitive health and is currently valued at a fraction of what Coke was when Buffett invested in the company in 1988.
Buffett likes Coca-Cola stock for one reason — the same reason he likes every company that he invests in: value. This has two meanings. First, he is notorious for only investing if it’s the right price and not a penny more. Coca-Cola stock, at the time, was at a good price with an interesting competitive edge. Coca-Cola owns nearly 50% of the U.S. soft drink market, so as long as people are drinking soft drinks, Coke will be performing well.
Second, and perhaps more important, is that Coca-Cola creates value. Buffett likes “productive assets” in that they produce cash and make a product. The legendary investor has stayed away from things like cryptocurrency because it doesn’t produce anything.
Buffett has previously mentioned Coca-Cola in this sense. He noted how Coca-Cola produces nearly 2 billion drink servings per day. So if Coke needs to produce more profit, it could raise its drink prices by just 1 cent per serving and produce an extra $20 million per day.
Picks like this are Buffetts' bread and butter, and he still likes Coca-Cola stock as much as the day he bought it. Coca-Cola has maintained its market dominance for decades, and as long as it keeps that up, Buffett is unlikely to sell.
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