Warren Buffett bought more than $1 billion in Coca-Cola stock in 1988, the equivalent of 6.2 percent of the company. This acquisition made it the largest position in Buffett’s portfolio at the time.

Coca-Cola shares remain one of Berkshire Hathaway’s largest assets. According to the 13F Declaration of June 30, 2023, the holding company owned a 9.2% stake in the company worth more than $23 billion. Its 400 million shares also make it Coca-Cola’s largest shareholder.

But why did the chairman of Berkshire Hathaway make the purchase at a time when stocks were still falling after the 1987 stock market crash? And why did he hold on to a soft drink company for so long?We talk about the success of a well-known investor in more detail.

 

How profitable stocks drowned as a result of the market crash

The 1987 stock market crash created some attractive opportunities for investors, as all stocks sold out without much attention to their fundamentals.

An example was Coca-Cola. As of 2023, it sells more than 200 beverage brands, from Costa Coffee to Vitamin Water, in more than 200 countries.

In marketing terms, Coca-Cola’s iconic name and global reach have created a moat around its staple soft drink product. A successful brand creates name recognition, distribution network, and retail relationships that protect it from competitors.

Warren Buffett understood that no competitor would emerge and take away Coca-Cola’s market share. On the contrary, over the years, the company has gradually absorbed potential competitors and mastered new trends through purchases such as Ayataka green tea and Dasani water.

 

Why Buffett loves Coca-Cola

While many investors were skeptical when Buffett first began buying Coca-Cola stock in 1988, Buffett himself defended the purchase.

That’s why he still approves of the company’s shares:

 

  1. Strong brandCoca-Cola has been and remains one of the world’s most recognizable brands. Its products are sold in more than 200 countries and it is the No. 1 manufacturer of non-alcoholic ready-to-drink beverages.
  2. Stable growthCoca-Cola’s market capitalization has reached $252 billion. In 1988, when Buffett first began buying stocks, the company’s market capitalization was $16 billion.
  3. Growing dividendsCoca-Cola pays a regular quarterly dividend of $0.46 per share as of September 2023.

 

Berkshire Hathaway deals with Coca-Cola

Buffett first began buying more than 23 million shares of Coca-Cola in 1988 at a price of $2.73 per share. After that, the stock split 2-to-1 four times; it increased its stake from 6.3% to 7.8% by 1994 and more than 9% today.

The giant investor has owned shares of Coca-Cola for decades and will have more than 400 million shares on its balance sheet by 2023.

Warren Buffett is still an investor in Coca-Cola. Here are the top 10 shares of Berkshire Hathaway’s investment portfolio (by market value) according to June 2023 data from the SEC:

 

  1. Apple (AAPL), $163.1 billion
  2. Bank of America (BAC), $29.3 billion
  3. American Express (AXP), $23.9 billion
  4. Coca-Cola (CO), $23.3 billion
  5. Chevron (CVX), $20.6 billion.
  6. Occidental Petroleum (OXY), $14.6 billion
  7. Kraft Heinz (KHC), $10.7 billion.
  8. Moody’s (MCO), $8.4 billion
  9. Mitsubishi Corp. (MSBHF), $6.0 billion.
  10. Mitsui &Co. (MITSF), $4.7 billion.

 

What is Warren Buffett’s investment philosophy?

Legendary investor Warren Buffett is known for following the Benjamin Graham School of Value Investing, which seeks out assets whose low prices do not reflect their intrinsic value. Buffett looks at companies holistically rather than focusing on stock market trends, taking into account factors such as company performance, debt, and profit margins.

 

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