There are three stocks that Warren Buffett has said he'd never sell: Coca-Cola (KO -1.02%), American Express, and Apple. However, that was when he controlled Berkshire Hathaway (BRKA +0.21%)(BRKB +0.36%). Now that he has taken leave of the CEO role, anything is fair game for new leader Greg Abel.
However, Abel has reassured shareholders that he's not looking to shake things up. He did promise to concentrate the portfolio in a smaller number of high-conviction stocks, and he came through in the first quarter, selling off 16 of the portfolio's smallest positions.
But he kept the big three, and Coca-Cola has already demonstrated its worth by soaring 11% after its second-quarter earnings release on July 28. Here's why I think he's going to keep on holding it.
Image source: Getty Images.
The Buffett favorite
Coca-Cola was the stock Warren Buffett was talking about when he said his favorite holding period is forever. "When we own portions of outstanding businesses with outstanding managements," he said, "our favorite holding period is forever."
That was written in the 1988 shareholders' letter, the year Berkshire Hathaway bought Coca-Cola stock for the first time, making it the longest-held stock in the portfolio.
Buffett detailed how much money the company gets from Coca-Cola's dividend in 2022, explaining that it had grown from $75 million in 1994, when it completed its $1.3 billion purchase of Coca-Cola stock, to $704 million in 2022 alone. This year, it will receive $848 million in dividends from Coke stock, and at some point, it will make back the full purchase amount each year from dividends, not including price appreciation.
Dividends are an important source of passive income for individual investors, and in Berkshire Hathaway's case, they provide cash for the company to operate and acquire new businesses.
Quenching thirst around the world
While the discussion could end there and still be relevant, there's more to the story. Coca-Cola has been beating the market this year, and it just shot up to a record high after reporting an outstanding update for the 2026 second quarter. Revenue increased 7% year over year to $13.4 billion, and earnings per share were up 16% to $1.03.
NYSE: KO
Key Data Points
While management acknowledged a tough environment, people love their favorite beverage and continue to buy it. "Our beverages are well-loved by consumers," said CEO Henrique Braun, "and the strength of our system is unmatched."
The performance was aided by a strong marketing campaign during the World Cup this summer, where the company's Powerade drinks were on full display; Powerade volume rose 8% in the quarter while trademark Coca-Cola volume rose 5%. But the company has been performing well all around as it releases new products, packaging, and sizes to make its drinks accessible to all kinds of consumers.
Coca-Cola offers great value for Abel and Berkshire Hathaway, and it's a great pick for the individual investor as well.
