Warren Buffett, a name that needs no introduction in the investing world, has remain invested in several stocks in his career as investor. However, this one stock has been able to deliver strong returns and is a testament that equities have the potential to deliver strong returns over the long term.
Mr. Buffett is the CEO of Berkshire Hathaway, which owns significantly diversified portfolio of several businesses and stocks. The holdings in the company’s equity portfolio perform very well in the long term as a result of Buffett’s long track record of picking up winners. There are several investors who track changes in the company’s equity portfolio so that they can make sound investment decisions for their own portfolio. Warren Buffett started his career as investor at the age of 11, and his strategy focuses on 2 parts: Patience and Appreciation of value over the long-term. Buffett took the charge of Berkshire Hathaway in 1960s and he turned the company into a holding company having subsidiaries across industries such as insurance, rail freight and energy.
Mr. Buffett has been able to built up positions in several public companies, and such investments span across technology firms to financial institutions. Equity portfolio of the company consists sizable stakes in numerous blue-chip stocks.
Just a word of advice for our readers: If you intend to follow Mr. Buffett’s investment strategy in your own portfolio, it is of utmost important to focus on investing money in businesses instead of latest hot stocks. Apart from this, investors are required to hold on to their investments for the long-term.
The Coca-Cola Company (NYSE: KO)-Warren Buffett all-time favourite investment
Berkshire Hathaway, led and managed by Mr. Buffett, initially bought the shares of The Coca-Cola Company in 1988. As a result of early pick, his investment has turned multi-fold and he is sitting on the significant profits. If assume that all the dividends were re-invested, an investment of just ~$1,000 at the beginning of that year could have been would be worth ~$60,000 today. In the Berkshire portfolio, this investment is presently the fourth largest holding, worth ~$25 billion.
If you know and follow Warren Buffett, you’d know that his utmost priority at the time of researching companies to make fresh investments is whether those companies have an economic moat. This will be present only if such business has some important characteristics which enable to dodge the competition, while at the same time, posting significantly financial results over extended time period.
If you have a quick look at the Berkshire Hathaway’s portfolio, you will be able to find several businesses having Buffett’s source of an economic moat (i.e., a healthy and strong brand). For example, Apple, which experts believe is the strongest brand in the world, is his largest holding. Apple continues to command ~50% of Berkshire’s entire portfolio of public equities. As per Interbrand, a management consulting company, The Coca-Cola Company’s brand has been valued at ~$57.5 billion. As a result of this, it has been categorised as a leading beverage category and ranks 7th overall among all the industries. This phenomenal growth stemmed from the company’s long history.
Just to brief our readers about the company, The Coca-Cola Company has several popular products in its portfolio, including sparkling soft drinks, energy drinks, sports drinks, etc. All these products are globally recognized. Such products are able to develop significant customer loyalty over the period of time which results in durable demand trends, irrespective of the situation of the economy. This is quite attractive from the investment perspective.
A strong brand is defined by the pricing power of that company. This is something Coca-Cola excels in and the company has used this power to its advantage.
Financial results
The Coca-Cola Company reported strong 2Q23 financial results, exhibiting continued momentum in the dynamic operating environment. Net revenues of the company went up by 6% to $12.0 billion, and organic revenues (non-GAAP) saw a growth of 11%. The company’s revenue performance consisted 10% growth in price/mix and 1% growth in concentrate sales. It has informed that 11% jump in organic revenue was mainly because of the pricing during the quarter. Even the company forced its customers to pay more for their beverages, the company’s global unit case volume was in line with the year-ago period.
Cash flow from operations of the company came in at $4.6 billion YTD, exhibiting a rise of $83 million as compared to the prior year. This was because of strong business performance and working capital initiatives.
For FY23, the company anticipates to post organic revenue (non-GAAP) growth of 8%-9%. For the comparable net revenues (non-GAAP), The Coca-Cola Company anticipates 3% – 4% currency headwind on the basis of current rates and considering the impact of hedged positions, apart from ~1% headwind as a result of acquisitions, divestitures and structural changes.
The company plans to deliver comparable currency neutral EPS (non-GAAP) growth of 9% – 11% and comparable EPS (non-GAAP) growth of 5% – 6% in comparison to $2.48 in 2022. It anticipates to generate FCF (non-GAAP) of ~$9.5 billion through CFO (Cash flow from operations) of ~$11.4 billion, less capex of ~$1.9 billion.
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