Hold Till You're Old: Why Warren Buffett Is Still Invested in Coca-Cola

A closer look into why Warren Buffett is still holding his Coca-Cola shares.

Jul 8, 2014 at 11:45AM

Warren Buffett is all about long-term wealth-building. Short-term trading may be the more exciting method of investing, but buying and holding for the long haul is the better way to build sustainable riches. Once you've done your due diligence, buying and holding a security despite market volatility gives you the best chance of earning respectable gains, versus trying to time the market.


Source: Coca-Cola Company.

Warren Buffett and Coca-Cola
Investors fail to hold on to their securities for many reasons, the biggest two being their inability to stomach market risk and their tendency to heed short-term market predictions. When a security's price declines a considerable amount, or when financial experts warn of a market dip, the average investor's instinct is to sell, cut their losses, and run for the hills.

Few have the wisdom of the great Warren Buffett. His ability to stay calm, ignore the noise, and hold on to his investments in the most treacherous market conditions is both rare and highly rewarding. When Buffett first purchased shares of Coca-Cola (NYSE:KO) in 1988, many Wall Street analysts disagreed with the move. Coke's earnings were sliding, and it was losing substantial market share to its competitors. In hindsight, Buffett's investment in Coca-Cola was a great move. With 42% percent market share today, Coke has established itself as one of the most dominant companies in the world and has earned Buffett over $10 billion in unrealized gains.

Coca-Cola is still a winner
Buffett understands the benefits of long-term investing better than anyone. Once he recognized the long-term growth potential of Coke, he decided to rely on time and compounding to generate earnings -- and it's working brilliantly, for the most part. Coke had a strong run from 1988-1998 (with share prices peaking at $88) and is still a good investment. Since 2009 -- the year that Coke revealed its 2020 vision, a long-term growth initiative that includes doubling its 2010 revenue by 2020 -- revenue has increased by 51%, and operating income has increased by 23%. Although revenue declined by 2% in 2013, management still believes the company is on track to achieve its 2020 vision goals. Further, despite the fact that soda consumption in the U.S. is declining, Coke continues to sustain and drive growth with its incomparable business model. Coke has an unrivaled distribution network that spans 200 countries and allows the company to generate 80% of its earnings outside the U.S. Furthermore, because Coke also offers healthier beverage choices (e.g., juices, teas, and sports drinks) it can capitalize on the current trend of Americans' increasing health-consciousness. Due to all of these factors, I believe Coke stock still makes a great investment today..  

My foolish conclusion
So what lessons can a new, inexperienced investor learn from Buffett's investment practices over the years? Once you find a company like Coca-Cola -- one with a solid business model, competitive advantages, growth prospects, and strong management -- invest and hold until you're old -- or at least for 10 years. Give the market and the magic of compounding an opportunity to generate substantial earnings. Disregard short-term market predictions and the urge to make quick profits. Don't allow greed and impatience to become the foundation of your investment decisions. Follow in Buffett's footsteps and hold on to securities for as long as possible. 

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Allen Screen has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

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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