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Berkshire Hathaway
Coca-Cola Gets Far Too Much Credit!

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By Parsad
September 16, 2004

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I think as investors, Berkshire shareholders in particular, we give far too much credit to the Coca-Cola Company. It's usually because of Warren's quote that if he were given $100B, he could not supplant Coca-Cola. Given $100B, I think it would be hard to supplant Berkshire Hathaway as reinsurer of choice, but if management did enough stupid things to give me an opportunity, it could be done.

I drink Coca-Cola like water, and I look forward to every new product they make. I never buy any Pepsi products for my home, and always ask for Coke at restaurants. I've owned shares in the past and I continue to own Coke through my ownership in Berkshire. But, this beast is a different company than the one we so admired over the years.

Primarily as a result of it's own institutional cultural belief that it is God's gift to business. When you're too busy patting yourself on the back, you don't notice what your competition is doing. Something that has gotten pretty ugly in the last few years, thanks to management. In fact I would say that the culture at Coca-Cola today is probably detrimental for the business, while the culture at Berkshire Hathaway is nothing but additive to intrinsic value.

Warren as the largest shareholder has been able to influence who is chosen as leader, and I have to say it seems to be a very hard thing to do at Coke, but there has been very little of Warren's influence at Coke in terms of how business is conducted. Today is a very good example of that. Coca-Cola continues to provide guidelines on earnings, warn when guidelines are not met, and service the perpetual stupidity of Wall Street. Didn't they learn anything at all from Buffett?

Charlie, in discussing currencies, once said "given enough time, eventually all currencies go to hell." Given enough time, even the best and strongest companies can obliterate any advantages they have, and destroy what once was perceived as unbeatable. I have seen nothing at Coca-Cola over the last five years that would make me comfortable with the huge advantages it has over its competitors. I won't buy any Coke unless it falls below $33/share and provides significant margin of safety. Cheers!


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