When investing, a few names come to mind as quickly as Warren Buffett. The Oracle of Omaha, as he is often called, is one of the most successful investors of all time, with an estimated net worth of over $100 billion. One of his most famous investments is in the soft drink giant Coca-Cola.
The Beginning of a Beautiful Relationship
Buffett’s first investment in Coca-Cola dates back to 1988 when he purchased 7% of the company’s shares for $1.02 billion. At the time, it was the largest investment he had ever made. Since then, he has continued to hold onto his shares, and as of 2021, Berkshire Hathaway (Buffett’s investment company) owns roughly 9% of Coca-Cola.
Why Coca-Cola?
Buffett has often cited Coca-Cola’s “economic moat” as one of the reasons for his investment. In business terms, an economic moat refers to a company’s ability to maintain a competitive advantage over its competitors. Coca-Cola’s brand recognition and distribution network are two factors that contribute to its economic moat.
In addition to its moat, Coca-Cola is a cash-generating machine. The company’s business model generates consistent cash flow, allowing it to pay dividends to shareholders for over a century. In fact, Coca-Cola has increased its dividend payout for 59 consecutive years, making it one of the most reliable dividend-paying stocks in the market.
The Numbers Speak for Themselves
Buffett’s investment in Coca-Cola has undoubtedly paid off. Since he first invested in the company in 1988, the stock has grown from around $2 per share to over $50 per share as of 2021. That’s an annualized return of roughly 10%, which is well above the average return of the S&P 500 over the same period.
In addition to capital appreciation, Berkshire Hathaway has received billions of dollars in dividends from Coca-Cola over the years. As of 2021, the company’s annual dividend payout was $1.68 per share, translating to roughly $670 million in dividends for Berkshire Hathaway.
What Buffett Says About Coca-Cola
Buffett has been very vocal about his love for Coca-Cola over the years. Here are a few quotes from the man himself:
- “If you gave me $100 billion and said take away the soft-drink leadership of Coca-Cola in the world, I’d give it back to you and say it can’t be done.”
- “Coca-Cola has an enormous social value. It’s a product that gives pleasure, creates a good atmosphere at meals, and is associated with happy times. Coca-Cola is a very special product.”
- “Our investment in Coca-Cola has been a bonanza.”
Final Thoughts
Warren Buffett’s investment in Coca-Cola is a testament to the power of investing in great companies for the long term. Coca-Cola’s strong brand recognition, distribution network, and consistent cash flow have made it a reliable investment over the years. Buffett himself said, “Time is the friend of the wonderful company, the enemy of the mediocre.”
So if you’re looking for a long-term investment opportunity, consider following in Buffett’s footsteps and adding Coca-Cola to your portfolio.
