Berkshire Hathaway (BRK.A 0.20%) (BRK.B 0.28%) has been an incredible investment for long-term investors. Over the past 20 years, its shares have rallied 756%, while the S&P 500 has risen 456%. Under Warren Buffett, who took over Berkshire Hathaway in 1965, the company thrived as it expanded its cash-rich insurance, railroad, utility, and consumer staples businesses. It also reinvested much of that cash into its closely watched stock portfolio.
Yet over the past 12 months, Berkshire's stock only rose 6% as the S&P 500 advanced 16%. The main reason for that sluggish performance was likely Buffett's retirement at the end of 2025.
Image source: Coca-Cola.
Without Buffett at the helm, Berkshire faces an uncertain future under its new CEO, Greg Abel. Abel previously served as the CEO of Berkshire Hathaway Energy, but he isn't a seasoned stock picker like Warren Buffett. Buffett's decision to pause Berkshire's buybacks over the past five quarters also strongly suggests its stock is overvalued.
So instead of investing in Berkshire Hathaway today, it might be smarter to buy one of its top holdings: Coca-Cola (KO +0.59%). Berkshire still holds 400 million shares of the beverage maker, worth $31.2 billion and giving it a 9.3% stake in the company. That position accounts for 9.5% of Berkshire's portfolio, making it the company's fourth-largest holding.
NYSE: BRK.B
Key Data Points
Why is Coca-Cola a better investment?
Coca-Cola operates a simpler business model than Berkshire Hathaway. It only sells the concentrates and syrups for its beverages, while its global network of independent bottling partners actually produces and sells the finished drinks. That capital-light business model enables it to maintain high gross margins and generate plenty of cash to cover its dividends.
That's why Coca-Cola raised its payout annually for 63 consecutive years. That makes it a Dividend King, which has hiked its dividends annually for at least half a century. It currently pays a forward dividend yield of 2.6%. Berkshire hasn't paid a dividend since 1967.
NYSE: KO
Key Data Points
Coca-Cola might seem like a shaky investment amid declining soda consumption rates. Yet over the past few decades, it expanded its portfolio with more brands of bottled water, fruit juices, teas, sports drinks, energy drinks, coffee, and even alcoholic drinks to offset that pressure. It also refreshed its flagship sodas with new flavors, healthier versions, and smaller serving sizes.
That's why Coca-Cola expects its organic revenue to rise 5%-6% in 2025, even after the currency headwinds from a strong dollar shave one to two percentage points from that total. Analysts expect its adjusted EPS to rise 4% in 2025 and 8% in 2026, even as inflation, a strong dollar, and other macro headwinds throttle its sales and squeeze its margins.
Coca-Cola's stock is still reasonably valued at 24 times forward earnings, and it remains a reliable safe-haven stock in this volatile market. I'm less bullish on Berkshire, which is still an excellent long-term investment but faces significant near-term challenges.
