Warren Buffett has owned a lot of stocks in his long career as an investor, but one has really quenched his thirst for strong returns. 

Berkshire Hathaway, the conglomerate led by Buffett, first purchased shares of Coca-Cola (KO) in 1988, and it's sitting on a massive gain right now. With dividends reinvested, a $1,000 investment at the start of that year would be worth $60,000 today. This is currently the fourth largest holding in the Berkshire portfolio, valued at $25 billion. 

Let's look at a likely reason Buffett was so drawn to Coca-Cola's business, as well as its potential investment implications. 

A strong brand 

Anyone who follows Buffett knows that his top priority when seeking out companies to invest in is whether they have an economic moat. That's only present if the business in question has some key characteristics that allow it to fend off competition, while posting better financial results over an extended period of time. 

Look through Berkshire Hathaway's portfolio and you'll quickly find numerous businesses that possess Buffett's favorite source of an economic moat: a strong brand. For example, Apple, which Interbrand estimates has the strongest brand in the world, is Buffett's largest holding by a long shot, commanding nearly 50% of Berkshire's entire public equities portfolio. 

According to Interbrand, Coca-Cola's brand is valued at $57.5 billion, leading the beverage category and seventh overall among all industries. That's truly an impressive feat that was boosted by the company's long history. 

Coca-Cola has popular products in several beverage groups, including sparkling soft drinks, energy drinks, sports drinks, coffee, tea, and water, all of which are globally recognized. And what's attractive from an investment perspective is that these products can build significant customer loyalty over time, resulting in durable demand trends no matter what the economy is like.  

A strong brand is exemplified by pricing power, something Coca-Cola has long been able to use to its advantage. In its latest quarter, the company said that of the 11% jump in organic revenue, most of it was due to pricing during the quarter. Despite forcing customers to pay more for their favorite beverages, global unit case volume was similar to the year-ago period. 

With advertising spending of $1.2 billion in the latest quarter, representing about 10% of overall sales, Coca-Cola is constantly trying to keep its brand on consumers' minds. 

Should you buy the stock?

During the second quarter, Coca-Cola beat Wall Street estimates for both adjusted revenue and adjusted diluted earnings per share. And management is so confident in the company's momentum that it raised full-year guidance for 2023. In what has otherwise been a rather challenging economy, Coca-Cola is proving its resilience. This could be attractive for investors who look for safe stocks to buy. 

Another valid argument for buying the stock is its dividend yield of 2.9%. And this is the 61st consecutive year that the business has raised its dividend. Because Coca-Cola produces consistent free cash flow, shareholders can be confident about the dividend. 

But the stock currently trades at a trailing price-to-earnings (P/E) ratio of 27.5. While that's a discount to rival PepsiCo's P/E of 33.3, it's still a steep valuation to pay for an enterprise that has a limited expansion runway. 

I look for businesses that have a lot more growth potential than Coca-Cola, which I view as a very mature company. But based on its strong brand, pricing power, and sizable dividend, I can see why some investors would be compelled to follow in Buffett's footsteps and buy the stock.