Coke Stock: Where Buffett and I Diverge

I got into investing when I read Warren Buffett's biography, The Snowball. Our personal investing styles don't exactly match, and Coca-Cola  (NYSE: KO  ) -- one of Buffett's largest holdings -- isn't exactly my ideal investment. But two years ago, while carving out my retirement portfolio, I included Coke stock because of its brand, dividend, and financial fortitude -- all traits Buffett looks for.

My original pledge to put $4,000 behind the stock has worked out well. That investment now stands at $5,355 -- or about $120 more than if I had invested in the SPDR S&P 500 ETF.

KO Total Return Price Chart

KO Total Return Price data by YCharts.

But, after some careful consideration, I'm afraid that it's time for me to part ways with my Coke stock. There's nothing wrong with the company's brand, dividend, or balance sheet. The problem is that it bugs me that I'm profiting from a company that's helping add to serious health problems in our country and world.

An important caveat
I first voiced my concerns with owning Coke stock two months ago. As I said in that piece, "I'm not here today to tell you what should or shouldn't be your moral investing compass -- that's a very personal decision that every investor needs to make for him- or herself." 

There's nothing wrong with owning Coke stock.

But there is something wrong with owning something that makes you lose sleep. Indeed, in his 2008 letter to shareholders, Buffett himself said, "I will not trade even a night's sleep for the chance of extra profits." 

With my wife and I expecting our first child this summer, we've already agreed that beverages sweetened with sugar or high fructose corn syrup -- HFCS for short -- are off the table. Neither of us drink them now, and we don't want them for our child. So the thought of pinning our retirement on the sales of these products just doesn't mesh with our own personal beliefs.

Digging deeper into the problem
The Centers for Disease Control and Prevention has assembled what might be the most alarming visual to put our obesity problem in perspective. Take a look: Back in 1990, fewer than 15% of Americans were considered obese. Today, that number is much higher.

Source: Centers for Disease Control and Prevention. 

Of course, it wouldn't be fair to say that all of this is due to Coke and its products. But it would also be naive to think the company's products didn't have something to do with it. The amount of sugar (or HFCS) Americans consume has increased 17-fold in the last 200 years, and soda has played a central role.

Source: OnlineNursingPrograms.com.  

Indeed, as people have become aware of these effects, Coke has acknowledged that soda sales are slumping in developed economies.

At first, I thought of holding shares, as Coke stock represents more than just the company's signature Coca-Cola product. And I will give credit where credit is due: The company's Odwalla juices and Simply Orange products only contain sugars naturally occurring in fruit. And the company's Dasani and SmartWater brands are simply bottled waters.

But the company's VitaminWater and Fuze Tea contain crystalline fructose in heavy doses, and its Minute Maid juices have lots of HFCS. When these products are considered along with all of the different sodas that Coke owns -- including Sprite, Fanta, Fresca, and Mellow Yellow -- there is simply too much here that I'm not comfortable with.

Where to go from here?
Within the month, I will be investigating possible replacements for the slot that Coke stock occupies in my retirement portfolio. But, as I said from the outset, there's nothing wrong with owning Coke stock. It's just not a position I'm personally comfortable with.

In fact, our analysts recently compiled a premium research report containing everything you need to know about Coca-Cola stock. If you own or are considering owning shares in the company, you'll want to click here now and get started!


Read/Post Comments (5) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 09, 2013, at 8:22 PM, allenbutler wrote:

    The issue with obesity today has a much to do with bioengineering as it does with sugar. It is always interesting to me that no one ever mentions the ills of investing in Flowers Foods due to the franken-wheat in ALL of their products (even the whole wheat varieties).

    If you are losing sleep over high fructose corn syrup in Coke's beverages, you are going to have a hard time sleeping at all when you delve into what is really making the world obese... our food supply is basically poison, and there are very few corporations that don't contribute to the problem... yes, Conagra, I am looking at you!

  • Report this Comment On May 10, 2013, at 3:34 AM, Jeffintucson wrote:

    Using a lot of charts and graphs are useless if your logic doesn't hold water. Blaming soft drinks for obesity is ridiculous. Next you will blame farmers. Obesity is an epidemic is the US and I will admit I was shocked at seeing all the fat people after flying into LAX last month and transiting on to St Louis after a year overseas. Coke is sold in over 200 countries and most of their business is overseas and aside for a few spots around the globe I haven't seen obesity. From what I can see too many Americans eat out and over consume over consume large portions and probably don't exercise. Just my opinion. The previous poster made some good points.

    I have noticed since my return Yahoo seems to have sold out to TMF giving them top billing on their homepage. Seldom, if ever do I see a MF article with any substance. Just dramatic headlines and invoking the name of Buffett.

  • Report this Comment On May 10, 2013, at 9:17 AM, jpericas wrote:

    Not fair to pick on Coke. How about McDonald's, Frito Lay, burgers, hot dogs, French fries, pop corn, butter, etc. Are you proposing like Bloomberg that the Government should control what we eat and drink ? It will be the end of freedom and democracy when the Government will restrict and control everything we do. Sad day.

  • Report this Comment On May 10, 2013, at 11:48 AM, TMFCheesehead wrote:

    @allenbutler-

    I'm in agreement with most of what you're saying. Check out a previous article I wrote on the topic:

    http://www.fool.com/investing/general/2011/11/22/occupys-nex...

    @Jeffintuscon-

    As I said in my piece, there is much more to the obesity rates than just soda, but soda plays a large part. And as for overseas businesses, the company gets 63% of its net operating revenues from North America and its bottling operations.

    See page 53 of the latest annual report here: http://www.sec.gov/Archives/edgar/data/21344/000002134413000...

    @jpericas-

    I tried to make it clear that there was nothing wrong with owning Coke. And Coke was singled out over the others because it was part of my 10 stock retirement portfolio. The other companies were not.

    In no way is this a comment on what the government should or shouldn't do, just an honest investigation as to why I'm selling the company from my public portfolio.

    Brian Stoffel

  • Report this Comment On May 10, 2013, at 8:05 PM, jpericas wrote:

    Fair pushback, thank-you.

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