Coca-Cola (NYSE: KO) is not the biggest position in Warren Buffett’s portfolio, but it is one of the billionaire’s favorites — and one that likely will remain there at current levels.
Buffett started buying shares of the world’s biggest nonalcoholic beverage maker in 1987 and continued adding to the position for a period of seven years. Those 400 million shares haven’t budged since. In fact, he has even described his holding on to Coca-Cola as “a Rip Van Winkle slumber.”
Buffett, known to drink several cans of Coke a day, clearly loves the product, and he also loves the fact that others feel the same way, too. This brand strength offers the company a moat, or competitive advantage, a key element Buffett looks for in a company. On top of this, the beverage giant has grown earnings over time and rewards investors with dividends.
For these reasons, Coca-Cola is likely here to stay in its position in the Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) portfolio. But it might not be the only stock to win Buffett’s permanent loyalty. In fact, a stock that he just reduced his position in could actually join Coke as one of Berkshire Hathaway’s “forever” holdings. My prediction is this stock will become Buffett’s next Coca-Cola …
Image source: The Motley Fool.
Buffett recently sold some shares of this stock
So, which stock am I talking about? Well, it’s another company that’s a household name, though it operates in the technology industry rather than the beverage sector: Apple (NASDAQ: AAPL).
But wait a minute, you might be saying, Buffett sold some of his shares in the iPhone maker during the second quarter. Isn’t that a bad sign?
Not necessarily. At the Berkshire Hathaway annual meeting in May, Buffett signaled that his Apple sales are linked to locking in the current 21% capital gains tax rate, and not due to a loss of faith in the company. He expects the tax rate to go up, considering the current size of the federal deficit. Even counting the sale of 49% of his Apple position, Buffett said it is “extremely likely” that at the end of the year, it will be Berkshire’s…
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