Warren Buffett’s Berkshire Hathaway owns a stake in Coca-Cola that represents 8.4% of the conglomerate’s public equities portfolio. Buffett has held this position for about four decades. Coca-Cola has a strong competitive advantage with its presence in over 200 countries and a 40% market share of the non-alcoholic ready-to-drink industry.
Consumers trust the brand for its consistency. Last quarter, Coca-Cola raised prices by 10% to offset a 1% dip in unit volume. This pricing power allows the company to fight inflationary pressures.
Coca-Cola is also highly profitable, with an average operating margin of 26.8% over the past decade. The stable nature of the business adds predictability to its model. However, Coca-Cola’s shares have underperformed the broader market in the past five and ten years, generating total returns of 33% and 105% respectively.
This is due to the company’s low growth prospects in a mature market. Even after a recent 14% dip, Coca-Cola’s stock looks fully valued with a price-to-earnings ratio of 25.8, slightly higher than the S&P 500. Coca-Cola is best suited for investors who prioritize dividends.
The stock offers a 3.1% dividend yield and has increased its payout for 62 consecutive years. While unlikely to outperform the S&P 500 in the long run, Coca-Cola could be a potential buying opportunity before 2025 for those seeking a reliable income stream.
Buffett’s long-term focus on dividends
As of December 19, 2024, Berkshire Hathaway’s $291.2 billion portfolio includes 44 stocks. Nearly 75% of the invested assets are concentrated in seven top holdings: Apple, Bank of America, American Express, Chevron, Occidental Petroleum, Coca-Cola, and Kraft Heinz. In 2024, Buffett has been selling equities, including significant reductions in Apple and Bank of America shares.
Many of Berkshire’s top investments are in integrated energy companies like Chevron and Occidental. Beyond the top seven, Buffett has allocated capital across 20 other billion-dollar stocks, including Kraft Heinz, Moody’s, Activision Blizzard, and Amazon. The portfolio also contains smaller holdings with market values between $8 million and $995 million, such as Domino’s Pizza, Liberty Live, and Ulta Beauty.
These trades are likely influenced by Buffett’s investing lieutenants, Todd Combs and Ted Weschler. Berkshire Hathaway acquired reinsurance company General Re in 1998, which owned New England Asset Management (NEAM). NEAM maintains its own portfolio, sometimes referred to as Buffett’s “secret” portfolio.
21% of NEAM’s holdings are invested in three ETFs: SPDR S&P 500 ETF Trust (13.1%), iShares Core MSCI EAFE ETF (4.2%), and Vanguard High Dividend Yield ETF (4%). The SPDR S&P 500 ETF Trust tracks the S&P 500 index and has seen a year-to-date gain of 27%, driven by the surge in artificial intelligence interest. The iShares Core MSCI EAFE ETF focuses on stocks of companies operating in Europe, Australia, Asia, and the Far East, while the Vanguard High Dividend Yield ETF tracks the FTSE High Dividend Yield Index and pays a 2.49% dividend yield.
While it’s difficult to predict how these ETFs will perform in 2025 due to uncertainty, they are considered solid long-term investment options. Corporate tax cuts could provide a tailwind for the SPDR S&P 500 ETF Trust and the Vanguard High Dividend Yield ETF.
