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EXECUTIVE SUMMARY
Warren Buffet’s Coca-Cola investment back then made it the largest position in Berkshire Hathaway‘s portfolio. Today, Coca-Cola is still one of Berkshire’s biggest holdings. Discover what made Buffet & Co. invest heavily in this company.
- Warren Buffett made a small business out of selling Coke when he was 7 years old.
- Buffett first bought $1 billion Coca-Cola stocks after the 1987 stock market crash.
- Buffett likes wonderful brands and he recognized that Coca-Cola is one that has great value and potential.
- With 400 million shares of Coca-Cola stocks, Buffett plans to hold on to his shares indefinitely.
- The right formula in business is happiness and feeling of restlessness.
FULL TRANSCRIPT
HOW IT STARTED
The 7-year old Warren Buffett was in Omaha during summer in 1937. He noticed people went out of the lawn just to cool off, so he got the idea of reselling soft drinks. He headed to his grandfather’s grocery store and bought 6 bottles for a quarter, which he then resold to people outside.
He went to different gas stations. During those days, every gas station had a cooler. Inside the coolers were soft drinks. Beside the coolers were can openers. Buffett went around and collected all the bottle caps for a week, and he collected 8,000 pieces. He sorted them all out and noticed how Coca-Cola overwhelmed everything else.
Buffett then headed to his grandfather’s grocery store and got a good deal on Coke. He bought 6 bottles for a quarter. He went around to resell it to people outside – which always ended up being sold out. That was the best business he ever had at that age.
However, he made one mistake.
Buffett didn’t put the money he saved from the Coke business into Coca-Cola stocks immediately. Many years later, he reaped from that mistake.
WARREN BUFFETT’S COCA-COLA INVESTMENT
Buffett first bought $1 billion Coca-Cola stocks in 1988, just months after the Black Monday 1987 market crash, a time when stock prices were generally low.
What made Buffett invest in Coke?
Coca-Cola had the biggest market share in the beverage industry at the time, and it still does today. Buffett recognized Coca-Cola’s moat. It was a good company, a strong brand that can withstand competition, and one that had the potential to expand overseas.
Buffett likes wonderful brands and he takes care of them dearly. And it shows clearly with Warren Buffett’s Coca-Cola investment throughout the years. Taking good care of businesses makes them last forever.
As of March 2021, Coca-Cola remains one of Berkshire’s largest holdings with 9.2% stake worth more than $21 billion. Berkshire Hathaway owns 400 million shares of Coca-Cola stocks and they never sold a share nor are they planning to sell a share.
THE RIGHT FORMULA
Everybody wants to own businesses that will participate in the future. Buffett does it; they have done it in decades at Berkshire; they will continue to do it.
With how the United States prepares for the challenges that are ahead in terms of economic policy, trade deficit tax, and reform, the country always has problems. Despite that, in Buffett’s opinion, the luckiest person on a probability basis is the one born in the USA. In 1790, the USA had 4 million people out of the hundreds of millions of people in the world. Americans weren’t smarter and they didn’t ever work harder than people necessarily did, but they had a system that unleashed human potential. That system has produced an unbelievable bond.
The standard of living of Americans improves in the span of their lifetime. For one, they have got the formula. In the last 10 or 20 years, they keep on turning out great people like Steve Jobs. Again, there are always problems, but problems are a stepping stone to a greater future.
“The world does not belong to the pessimist,” Buffett believes. Happiness is the right formula and it just has to be carried out with extreme diligence and enthusiasm.
WHAT DO BUSINESSES NEED TO DO?
Buffett likes studying failure, because he wants to see what causes businesses to go bad. According to him, the biggest thing that kills a business is complacency.
Everyone wants a restless feeling that somebody’s always after them and they aim to stay ahead of them. Great investors always want to be on the move. With a great business like Coke, the danger would always be resting. Good thing about it is that Buffett sees none of that in coke.
The key to a great business is to compete the same way when you’ve got 1.8 billion as you were selling 10 a day. With that restlessness and belief, tomorrow will be more exciting than today.
Buffett always has a feeling of restlessness even as a kid when he started selling Coke. And this feeling led him to this great success.
