Enduring Investment Selection by Warren Buffett: A Specific Equity
Renowned investor Warren Buffett has declared his intention to never part ways with three specific stocks: Coca-Cola (KO -0.14%), American Express, and Apple. Even though Berkshire Hathaway unloaded some Apple shares around the time of this declaration, it remains Buffett's premier investment, accounting for an astounding 24.8% of the entire equities portfolio. American Express now occupies the second spot, representing 15.3% of the portfolio.
Coca-Cola has consistently held a significant position in Berkshire Hathaway's holdings, and its current proportion stands at 8.4%. Buffett currently owns 9.3% of the entire Coca-Cola stock, expressing his admiration for the brand on numerous occasions. Despite not setting any new market records recently, Coca-Cola continues to be a stock that a considerable number of investors should consider holding on to indefinitely.
Quenching global thirst
Buffett is renowned for his distinctive approach to investing. He prefers to refer to himself as a "business picker," as opposed to a "stock picker." He champions the American narrative and tends to invest in businesses that are integral to its future.
His recent investment choices, such as Domino's Pizza and Pool Corp., demonstrate this strategy. These businesses do not boast the buzz surrounding cutting-edge tech or artificial intelligence stocks. Instead, they rely on a sound consumer demand base and long-term growth potential.
Coca-Cola embodies this approach to the fullest extent. Its worldwide customer base encompasses millions, potentially billions, with an unmatched reach and distribution system. It is an ordinary presence on countless tables, available in various formats through various purchasing options.
The brand boasts considerable power and flexibility in pricing, nearing consumer loyalty through its strong brand presence and relationship-building endeavors. Buffett frequently praises its global visibility, commenting that it possesses an inherent ability to travel and cater to a fundamental human need.
When Buffett famously proclaimed his preference for an infinite holding period, he was referencing his new Coca-Cola stock investment, made in 1988. He commented, "We often invest in exceptional businesses with top-notch management, and our preferred holding term in such cases is infinite."
He further emphasized that investing legend Peter Lynch argued that trading profitable stocks to pocket gains while holding on to subpar ones was likened to "plucking flowers and watering weeds."
The dividend distinction
Berkshire Hathaway invested an impressive $1.3 billion in Coca-Cola stock between 1988 and 1994. Beyond its price appreciation, it has proven exceptionally rewarding due to its dividend payments. Berkshire Hathaway alone reaped $704 million in Coca-Cola dividends in 2022 alone.
Coca-Cola boasts the coveted title of "Dividend King," having raised its dividend annually for the past 62 years. This remarkable track record showcases Coca-Cola's ability to deliver a raise under even the most challenging market conditions, including downturns and recessions. The dividend yield currently stands at 3.1%, more than doubling the S&P 500's average.
Regardless of its underperformance in comparison to the market since Berkshire Hathaway's acquisition of the Coca-Cola stock, Buffett remains a dedicated admirer. The dividend serves as a valuable cash resource for Berkshire Hathaway, thereby bolstering its business growth.
Individual investors also enjoy benefits beyond passive income. Coca-Cola serves as a cornerstone stock, providing stability during market volatility. During the 30-year period that Buffett has owned the stock, it has experienced periods of outperformance, often when the market is in decline.
Investing in Dividend Kings can help protect a portfolio during lean times. Buffett is optimistic about Coca-Cola's longevity, asserting that it will establish itself as a critical component of the global economy. This makes it an optimal choice for stabilizing an individual investor's portfolio.
Buffett's investment in Coca-Cola has not only resulted in significant price appreciation but also substantial dividend payments. Berkshire Hathaway received $704 million in Coca-Cola dividends in 2022 alone, highlighting the financial benefits of holding onto such a dividend-paying stock.
Given Coca-Cola's status as a 'Dividend King', having increased its dividend annually for over 62 years, it provides a reliable source of income for investors. Buffett views this stock as a valuable cash resource, strengthening Berkshire Hathaway's business growth and offering stability during market volatility.
