Coca-Cola (KO): $28.74 Billion Investment and Strategic Growth in Warren Buffett’s Portfolio

view original post

We recently published a list of Warren Buffett’s 10 Longest-Held Stocks. In this article, we are going to take a look at where The Coca-Cola Company (NYSE:KO) stands against other Warren Buffett’s longest-held stocks.

Warren Buffett has cemented his legacy as Wall Street’s most successful investor. During the high-flying stock market of the 1960s, he leveraged his investment partnership to acquire Berkshire Hathaway, a struggling New England textile company at the time. Today, the firm is a vastly different entity, boasting a diverse range of businesses from Geico insurance to BNSF Railway, an equity portfolio exceeding $266 billion, and an enormous cash reserve of $325.2 billion. Decades of strong returns have built Buffett’s unmatched track record. Since he took over in 1965, the company’s shares have delivered an annualized gain of 19.8%.

Buffett has famously stated that his ideal holding period for a stock is “forever”. True to his word, the Oracle of Omaha has held onto some of his favorite stocks for the long haul, allowing them to deliver steady share performance and generate passive income for his portfolio over time. Moreover, market analysts and investors alike have consistently praised Buffett’s disciplined, long-term approach to investing, more so now that his firm has become the latest non-tech firm to surpass a $1 trillion market cap, highlighting Buffett’s stock-picking abilities.

However, despite strong market performance through much of 2024, Buffett seems to have adopted a more defensive stance. Concerned about inflated valuations amid high interest rates and worsening economic conditions, he has offloaded significant holdings in companies whose valuations have surged too high. Billionaire investor David Einhorn of Greenlight Capital echoed this in his hedge fund’s quarterly letter, noting Buffett’s cautious approach:

“One could argue that sitting out bear markets has been the underappreciated reason for his outstanding long-term returns. It is therefore noteworthy to observe that Mr. Buffett is again selling large swaths of his stock portfolio and building enormous cash reserves.”

Over the past two years, Buffett has been an active net seller of stocks. His firm offloaded a total of $36.1 billion in stocks during the third quarter, marking the eighth consecutive quarter in which Berkshire was a net seller of equities. At the company’s annual shareholder meeting in May, Buffett mentioned the possibility of a future rise in the corporate tax rate.

Moreover, in his 2023 letter, Buffett also addresses common questions about Berkshire, including whether the company can continue to achieve the same level of outperformance as in the past:

“There remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others. Some we can value; some we can’t. And, if we can, they have to be attractively priced. Outside the U.S., there are essentially no candidates that are meaningful options for capital deployment at Berkshire. All in all, we have no possibility of eye-popping performance. Nevertheless, managing Berkshire is mostly fun and always interesting. On the positive side, after 59 years of assemblage, the company now owns either a portion or 100% of various businesses that, on a weighted basis, have somewhat better prospects than exist at most large American companies.”

Our Methodology

To create our list of Warren Buffett’s longest-held stocks, we analyzed his Q3 2024 investment portfolio and selected stocks that he has consistently held for the longest duration. These figures were sourced from the Insider Monkey Database.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A row of factory workers assembling bottles of sparkling soft drinks on a conveyor belt.

The Coca-Cola Company (NYSE:KO)

Warren Buffett’s First Major Purchase: 1988

Berkshire Hathaway’s stake in Q3 2024: $28.74 billion

Founded in 1892, The Coca-Cola Company (NYSE:KO) is a global leader in the beverage industry, best known for its iconic Coca-Cola drink. Beyond its flagship product, the company is heavily involved in the production, distribution, and marketing of a wide variety of non-alcoholic beverages, including concentrates, syrups, and, more recently, alcoholic drinks. Warren Buffett, a longtime advocate of Coca-Cola, once joked, “I’m one-quarter Coca-Cola.” underscoring his love for the brand. Moreover, the brand is also tied to his massive investment in the company. As of Q3 2024, Berkshire Hathaway holds 400 million Coca-Cola shares, valued at more than $28.74 billion, making up approximately 10.79% of the fund’s portfolio.

In its Q3 2024 earnings, The Coca-Cola Company (NYSE:KO) reported mixed results. While volume declined by 1%, and the quarter started slow in July, the company still achieved 9% organic revenue growth and a 5% increase in comparable earnings per share, reaching $0.77. Additionally, The Coca-Cola Company (NYSE:KO) made a $6 billion tax deposit to the IRS, related to an ongoing dispute. The company revised its 2024 outlook, forecasting around 10% organic revenue growth and 14% to 15% EPS growth, despite facing currency headwinds.

Additionally, The Coca-Cola Company (NYSE:KO) has consistently increased its dividends for over 60 years, earning its place among the elite Dividend Kings group. As of November 22, the company offers a dividend yield of 3.04%.

On October 23, Morgan Stanley lowered its price target for The Coca-Cola Company (NYSE:KO) to $76 from $78 but maintained its Overweight rating. The firm noted Coca-Cola’s strong third-quarter performance and expects the company’s organic sales growth to outpace competitors as the broader industry’s pricing power diminishes.

Overall, KO ranks 1st on our list of Warren Buffett’s longest-held stocks. While we acknowledge the potential of KO, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock

Disclosure: None. This article is originally published at Insider Monkey.