Nobody can do what Warren Buffett can do. But, fortunately, we can learn a lot from how he invests. He likes to teach, and we can eventually discover what positions he adds to his portfolio. Take a look at the following companies – all identified by Mr. Buffett as great businesses.
Coca Cola (KO) is probably the best business in the world. Through his holding company, Berkshire Hathaway (BRK.A, BRK.B,) Warren Buffett owns approximately 9% of KO shares outstanding. KO has been in operation since 1886 and it has increased its dividend (almost!) every year since its inception. It is highly likely that 10, 15 or 20 years from now, citizens of planet Earth will still be drinking Coca-Cola, regardless of what happens in the eurozone.
KO runs its business operations like a well-oiled machine. The global economy is sputtering, but KO has invested $4 billion in China over the past year. KO earns more than $5 per share and trades at 12 times earnings – well below its historical average selling price at around 20 times earnings. Incredible this beverage behemoth has a 41% return on equity.
KO has a 27% profit margin and quarterly earnings growth of more than 8%. This means that it can produce and distribute its product with very little capital expense. Of all the businesses Buffet owns, he has explicitly stated that he has the most confidence in the long-term success of KO.