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Warren Buffett Watch
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History Lesson: Warren Buffett's 'Crazy' Coca-Cola Bargain Buy
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Jeff Chiu / AP |
Flashback to 1988, when Buffett bought a lot of Coca-Cola stock, even after it had gained almost 20% a year for eight years. Joe Ponzio's FWallStreet has an interesting analysis of why Buffett bought Coke even though Wall Street thought "he was downright crazy." Bottom line: In 1988, Coca-Cola was a "cash cow" with steady shareholder equity growth and an incredibly well-known brand. Buffett bought shares that were selling at a substantial discount compared to a reasonable valuation of the company and its prospects. To Ponzio, it was a "no-brainer" investment that has turned a $1 billion purchase into a $10 billion stake generating more than a quarter-billion dollars a year in dividends.
Looking for more lessons from the Oracle?
Thisismoney.co.uk, a website from the publishers of Britain's Daily Mail newspaper, offer a very clear and concise guide on how to "Invest like Warren Buffett." It neatly summarizes Buffett's views on value investing, and why he looks for companies with good management, a history of strong profits, not too much debt and a "moat."
John Reeves has a similar summary called "Warren Buffett's Priceless Investment Advice" on The Motley Fool. He gets into some of the "devil in the details" about deciding when to buy after you've identified a target.
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