Warren Buffett on Wartime Investing, Coca-Cola, and PepsiCo

Some perspective from the Oracle of Omaha, including on Coca-Cola and PepsiCo.

Mar 3, 2014 at 10:15AM

Risk off! U.S. stocks opened lower this morning, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES:^DJI) down 0.88% and 0.99%, respectively, at 10:15 a.m. EST. This may have something to do with the fact that Russian soldiers have boots on the ground on Ukrainian soil in what appears to be a volatile, unpredictable situation. The Russian ruble fell to a record low against the dollar today and the RTS Cash Index of Russian stocks is down 12.5% as I type this. These are the sort of headlines that can cause many investors to act rashly and in a manner contrary to their long-term interests. Thankfully, Berkshire Hathaway(NYSE:BRK-B) CEO Warren Buffett, appearing on CNBC this morning, offered some much-needed perspective from someone who bought his first stock in 1942 ("I will tell you the macro factors were not looking good!"). He also provided his current thinking on some individual stocks, including PepsiCo (NYSE:PEP) and Coca-Cola (NYSE:KO).

Unruffled by the news out of Ukraine, Buffett is actually buying a stock this morning -- and he likes it better today than he did on Friday:

When I got up this morning, I actually looked at a stock on the computer that trades in London that we're buying and it's down and I felt good. ... It was an English stock. ... I had a price limit on it and we were buying it on Friday, but it's cheaper this morning and that's good news.

What of the potential threat of World War III or a return to the Cold War, countered CNBC's Becky Quick? Buffett responded:

If you tell me all of that's going to happen, I will still be buying the stock. You're going to invest your money in something over time. The one thing you can be quite sure of is if we went into some very major war, the value of money would go down -- that's happened in virtually every war that I'm aware of. The last thing you'd want to do is hold money during a war.

So if you don't want to hold cash, what do you want to own?

You might want to own a farm, you might want to own an apartment house, you might want to own securities. During World War II, the stock market advanced -- the stock market is going to advance over time. American businesses are going to be worth more money, dollars are going to be worth less, so that money won't buy you quite as much, but you're going to be a lot better off owning productive assets over the next 50 years, than you will be owning pieces of paper.

And speaking of an American business that has grown its intrinsic worth at an extraordinary rate over the past 50 years, one viewer asked Buffett if he was worried about Coca-Cola's moat declining in the near future? [Coca-Cola is one of Berkshire Hathaway's "Big Four" stock investments -- Buffett said it is very unlikely that he would sell it within the next five years.]

[Coca-Cola] is under a lot more pressure than it was 10 or 15 years ago, particularly in the United States, but their sales went up last year -- just as they go up almost every year -- in terms of unit cases of carbonated soft drinks. They're right now 3% of all the liquids people put in their mouths throughout the whole 7 billion people are Coca-Cola products and think maybe that 3% will go up a little over time. I think they've got wonderful brands and wonderful acceptance around the world; Coca-Cola brand itself sold 100 million more cases last year, as I remember, than the year before and it sold more that year than the year before. It's a very, very good business.

Buffett also had something to say about Coca-Cola competitor PepsiCo, which has been under pressure from activist investor Nelson Peltz to spin off its Frito-Lay snack business:

I don't think if I owned Pepsi -- if I was the only holder of it or my family was the only holder of it -- I don't think I'd split it up. I think that Frito-Lay is an extremely good business, it's a better business than the soft drink business, but I think the soft drink business is a good business, too and I don't see any reason to split them up.

Focus on high-quality businesses. Continue buying stocks when the macroeconomic environment looks gloomy. Take the long view. These are lessons that all investors ought to learn -- and relearn -- if they want to achieve long-term success.

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Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, Coca-Cola, and PepsiCo. The Motley Fool owns shares of Berkshire Hathaway, Coca-Cola, and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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