Warren Buffett-led conglomerate Berkshire Hathaway (BRK.A 0.64%) (BRK.B 0.54%) has quite a few winning investments in its stock portfolio, with one stock worth more than 13 times the price Buffett paid for it. Here are the details of Buffett's biggest stock win, as well as some other notable investments on the Oracle of Omaha's resume.
Berkshire's five biggest-winning stocks
As of the end of 2016, here are the five best-performing stocks in Berkshire's portfolio, as compared to the price Berkshire paid to acquire them.
|
Company |
Number of Shares |
Cost Basis |
Today's Market Value |
Gain |
|---|---|---|---|---|
|
Coca-Cola |
400,000,000 |
$1.3 billion |
$16.6 billion |
1215% |
|
Moody's Corp |
24,669,778 |
$248 million |
$2.33 billion |
1023% |
|
American Express |
151,610,700 |
$1.3 billion |
$11.2 billion |
815% |
|
Goldman Sachs |
11,390,582 |
$654 million |
$2.7 billion |
289% |
|
Kraft Heinz |
325,442,152 |
$9.8 billion |
$28.4 billion |
190% |
Data source: Berkshire Hathaway 2016 annual report. Note that this list only considers Berkshire's 15 largest stock holdings.
Buffett's biggest stock investment win
As you can see from the chart, Coca-Cola (KO 0.68%) is Buffett's biggest win from a stock. Buffett's return on his Coca-Cola investment is more than tenfold, and it's important to mention that this return doesn't include the dividends he's collected from his 400 million shares of Coca-Cola over the years. This adds a substantial amount to the total return from this investment -- consider that Buffett's Coca-Cola dividends in 2017 alone will be $592 million.
Image source: The Motley Fool.
Coca-Cola is one of the longest-running investments in Berkshire's portfolio, with Buffett originally investing in the beverage giant in 1988.
Buffett's reasons for investing in, and sticking with, Coca-Cola are easy enough to understand. The company's iconic brand name is one of the most recognizable in the world, and gives the company a durable competitive advantage. Plus, the company has one of the most impressive and widespread distribution networks in the world, which give cost advantages over the competition.
In addition, Buffett is a loyal Coca-Cola customer himself, and clearly believes in the product. In fact, Buffett estimates that he consumes roughly one-fourth of his calories from Coca-Cola beverages every single day.
Other notable Berkshire wins
While the Coca-Cola investment is Buffett's biggest win, based on the current value of his shares relative to the price he paid for them, there have been many other stock investment wins in Berkshire's portfolio over the years.
For example, Berkshire's gain on its Goldman Sachs shares pales in comparison to Coca-Cola. However, keep in mind that the Coca-Cola return took nearly years to achieve, while the Goldman shares were acquired in 2011 as the result of a 2008 deal to buy preferred stock and warrants in the bank. Berkshire's 289% return on the cost of its Goldman Sachs stock translates to an annualized return of more than 16%, a pretty big investment win.
Another important point is that Coca-Cola is the best return among Berkshire's active stock investments. Berkshire has sold many stock investments at impressive profits over the years.
Although it was the work of Buffett's stock-picking lieutenants, Todd Combs and Ted Weschler, the purchase of DirecTV stock in 2011 is a great example of a previous Berkshire win. When DirecTV agreed to merge with AT&T, the resulting combination of AT&T stock and cash, plus the sale of some DirecTV shares before the merger was completed translated to a $3 billion gain for Berkshire -- more than doubling Berkshire's investment in about five years, by the time Berkshire unloaded the last of its AT&T stock.
Buffett's best stock investment win of all?
Finally, we could also say that Buffett's absolute biggest stock investment win was Berkshire Hathaway itself. At the time Buffett bought his first Berkshire shares, he had no intention of taking over the company and building Berkshire into what it is today. Rather, Buffett saw Berkshire as a fading textile company he could make a quick buck from.
Well, in 1964, Berkshire's management offered to buy Buffett's shares for $11.50 apiece, to which Buffett agreed. The offer was subsequently reduced by a mere eighth of a point, which enraged Buffett to the point where he bought enough Berkshire stock to take control of the company and fire the manager who reduced Buffett's tender price.
Shortly after, Buffett started buying up insurance companies and other businesses under the Berkshire umbrella, and the rest is history. Buffett's shares rose to more than $245,000 each over the next five decades or so -- a return of more than 2,000,000% on the original investment.
