In Warren Buffett’s recent letter to shareholders, the Oracle of Omaha noted his preference to stick with some of the longest-term holdings in his portfolio.
Indeed, any investor who buys a stock at a relatively low cost basis and sees it rise over the years is likely to be overcome by a large tax bill at the end of the day. Buffett’s view has always been to limit the tax burden on his corporation, and therefore his shareholders, by being a long-term shareholder in the companies he buys.
The Coca-Cola Company (NYSE:KO) has been one of the staples of Buffett’s portfolio for years. This soft drink maker has relied on its world-class brand and management team to continue to generate growth, despite its size.
As companies get larger, top- and bottom-line growth can become more elusive. Coca-Cola’s ability to target new markets, and retain its position as one of the top brands globally in most countries, is impressive.
Coke has been generous in returning capital to shareholders via dividends over the years, raising its dividend on a pretty consistent basis. Today, investors considering Coke can pick up a 3.4% yield, which is relatively juicy when one considers where bond yields are at today.
I think Coke’s brand provides investors with a rock-solid moat the likes of which are rarely seen in most industries. Accordingly, I’m going to side with Buffett on the benefits of owning such a company long-term.
Invest wisely, my friends.
