50 THE WARREN BUFFETT WAY
That same chain of thinking also applies to his decisions about buy-
ing stocks, and that does present some examples that ordinary mortals
might follow. We may not be able to buy shares on the same scale as
Warren Buffett, but we can prof it from watching what he does.
At the end of 2003, Berkshire Hathaway’s common stock portfolio
had a total market value of more than $35 billion (see Table A.27 in the
Appendix)—an increase of almost $27 billion from the original pur-
chase prices. In that portfolio, Berkshire Hathaway owns, among oth-
ers, 200 million shares of Coca-Cola, 96 million shares of the Gillette
Company, and 56-plus million shares of Wells Fargo & Company. Soft
drinks, razor blades, neighborhood banks—products and services that
are familiar to us all. Nothing esoteric, nothing high-tech, nothing
hard to understand. It is one of Buffett’s most strongly held beliefs: It
makes no sense to invest in a company or an industry you don’t under-
stand, because you won’t be able to f igure out what it’s worth or to
track what it’s doing.
The Coca-Cola Company
Coca-Cola is the world’s largest manufacturer, marketer, and distribu-
tor of carbonated soft drink concentrates and syrups. The company’s
soft drink product, f irst sold in the United States in 1886, is now sold in
more than 195 countries worldwide.
Buffett’s relationship with Coca-Cola dates back to his childhood.
He had his f irst Coca-Cola when he was f ive years old. Soon afterward,
he started buying six Cokes for 25 cents from his grandfather’s grocery
store and reselling them in his neighborhood for 5 cents each. For the
next f ifty years, Buffett admits, he observed the phenomenal growth of
Coca-Cola, but he purchased textile mills, department stores, and wind-
mill and farming equipment manufacturers. Even in 1986, when he for-
mally announced that Cherry Coke would become the off icial soft
drink of Berkshire Hathaway’s annual meetings, Buffett had still not
purchased a share of Coca-Cola. It was not until two years later, in the
summer of 1988, that Buffett purchased his f irst shares of Coca-Cola.
The strength of Coca-Cola is not only its brand-name products, but
also its unmatched worldwide distribution system. Today, international
sales of Coca-Cola products account for 69 percent of the company’s
total sales and 80 percent of its prof its. In addition to Coca-Cola Amatil,