Image source: The Motley Fool
Warren Buffett — who announced he’s stepping down from Berkshire Hathaway at the end of 2025 — has left an indelible mark on the investing world.
Since the mid-1960s, Berkshire’s shares have delivered a stunning average annual return of 20.1%. To put that into context, the S&P 500 has produced an average return of 11.4% over the last 50 years. So it’s no wonder professional and retail investors alike eagerly follow the latest on what Buffett’s been buying and selling.
The ‘Oracle of Omaha’ hasn’t always got it right, as his $433m purchase of Dexter Shoe Company in 1993 showed. But as his wider record shows, the rare misfires have been comfortably dwarfed by his decades of picking winners.
With this in mind, here’s a top Buffett share I’m considering adding to my own portfolio: The Coca-Cola Company (NYSE:KO).
A Buffett beauty
The Coke manufacturer is perhaps Buffett’s most famous holding. Since buying his first shares in the late 1980s, he’s steadily built his stake and Berkshire today owns 400m shares. That’s equivalent to around 8% of the soft drinks giant’s outstanding shares.
Only Apple, American Express and Bank of America command larger places in Berkshire’s portfolio.
Buffett’s not sold a single share in Coca-Cola down the years. He loves the terrific brand power of its drinks — the likes of Coca-Cola, Fanta, and Sprite all remain in high demand at all points of the economic cycle, making it one of the most robust businesses on the planet.
As the table shows, Coca-Cola is by far the world’s strongest non-alcoholic drinks brand, and the only such product with Brand Finance’s ‘AAA+’ brand strength rating. That’s thanks to the company’s exceptional markets and long track record of market-leading innovation.
This means that if volumes suffer during downturns, Coca-Cola can hike prices to offset this and keep growing earnings. It can also reduce the impact of rising costs on the bottom line. While case volumes rose just 2% in January-March, targeted price hikes meant organic sales improved by a much healthier 6% over the quarter.
This in turn meant earnings per share improved 5% year on year.
Dividend king
As well as its formidable brand power, Coca-Cola’s robustness is also helped by its multi-sector exposure. It manufactures energy drinks, coffee, juices, water and alcohol alongside its world-famous soft drinks.
The firm’s endurance is also thanks to its wide geographic footprint, which protects group earnings from weakness in one or two territories. Today, around 2.2bn of the company’s drinks are solid across 200 countries in developed and emerging markets.
This multinational approach does leave it vulnerable to adverse currency movements. But so far this hasn’t derailed the company’s strong history of profits growth.
Incidentally, City analysts think Coca-Cola’s annual earnings will rise another 20% in 2025. This also leads them to tip another raise in the yearly dividend, the 64th in a row.
Today, Coca-Cola shares trade on a premium price-to-earnings (P/E) ratio of 24.2 times. It’s the sort of industry-high valuation that could prompt it to fall sharply in price if investor confidence begins to waver. Yet despite this risk, I think the soft drinks star is more than worthy of this princely valuation.
It’s why I’m considering adding it to my own portfolio.
