No. of Recommendations: 17
Buffett acquired Coke from 1988 through 1989. ...
Buffett saw a half century, at least a clear quarter century, runway for Coke. Time has proven him 100% correct.
His pick was outstanding, but I'd say it was outstanding for only a decade or so.
From the 10 year mark at around end 1998, Coke's real EPS are up inflation + 1.75%/year. Yuk.
Earnings were a little above trend at that point, so it's a slightly unfair baseline to pick.
Starting from 2001 Q1, which was pretty much smack on the trend of real earnings excluding one-time items, rolling-four-quarter EPS up inflation + 2.44%/year.
For comparison, S&P 500 smoothed real earnings are up inflation + 3.72%/year in the same period, quite a lot better.
So far this millennium the stock pick, evaluated as a selection of a high quality business rather than based on current period stock price return, has been worse than the average pick from a monkey with a dartboard. Coca Cola is is ticking along and won't go bust. But it's not thriving, and it definitely hasn't been for a quarter of a century.
Heck, a 25-year T-bond bought 25 years ago at the 10th anniversary of the Coke purchase and held to maturity now would have returned not all that much less than Coke's real total return without valuation multiple changes. (inflation + 3.72%/year for the bond, maybe inflation + 5.5%/year counting dividends for Coke if it had always traded at a constant multiple of trend real earnings)
Jim
