Buffett's biggest investor is buying Coca-Cola

Warren Buffett - the Oracle of Omaha - is considered one of the greatest investors of all time.

Berkshire Hathaway Inc. has returned tens of thousands of dollars over the years and consistently surpasses the market. Buffett bought the company for just $8.3 million in 1965, and it is now valued at more than $700 billion, about a 10 million percent return.

One of Buffett's top all-time picks and longest-held positions is one you might not expect. Berkshire Hathaway first started buying Coca-Cola Co. KO stock in 1988 and continued to accumulate shares since. Berkshire Hathaway owns 400 million shares of Coca-Cola stock valued at $22 billion or about 8% of the company.

In the 1988 period when Buffett began purchasing the company, the stock was sitting at a few dollars per share, so Berkshire Hathaway is sitting on huge gains in the company. Coke has a dividend worth 44 cents per quarter, so he gains nearly $1 billion per year in dividends on top of that.

There are still value picks in the industry, and you are unlikely to see those kinds of returns in Coca-Cola stock anymore because of its size. TruBrain is a startup that creates drinks and supplements that are focused on cognitive health and is currently valued at a fraction of what Coke was when Buffett invested in the company in 1988.

Buffett likes Coca-Cola stock for one reason - the same reason he likes every company he invests in: value. This has two meanings. He is known for only investing if it is the right price and not a penny more. The Coca-Cola stock, at the time, was a good price with an interesting competitive edge. Coca-Cola owns more than 50% of the U.S. soft drink market, so Coke will be performing well as long as people are drinking soft drinks.

It is perhaps more important that Coca-Cola creates value. Buffett likes productive assets in that they produce cash and make a product. The legendary investor has stayed away from things like cryptocurrencies because they don't produce anything.

Buffett has previously mentioned Coca-Cola in this sense. He said that Coca-Cola produces nearly 2 billion drink servings per day. So if Coke needs to make more profit, it could raise its drink prices by just 1 cent per serving and produce an extra $20 million per day.

Picks like this are Buffetts' bread and butter, and he still likes Coca-Cola stock as much as the day he bought it. Buffett is unlikely to sell as long as it keeps that up, and Coca-Cola has maintained its market dominance for decades.

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