112 THE WARREN BUFFETT WAY
By any measurement, Goizueta’s Coca-Cola was doubling and
tripling the f inancial accomplishments of the previous CEO. The results
could be seen in the market value of the company. In 1980, Coca-Cola
had a market value of $4.1 billion. By the end of 1987, even after the
stock market crash in October, the market value had risen to $14.1 bil-
lion (see Figure 7.2). In seven years, Coca-Cola’s market value rose at an
average annual rate of 19.3 percent.
The Washington Post Company
When Buffett purchased stock in the Washington Postin 1973, its re-
turn on equity was 15.7 percent. This was an average return for most
newspapers and only slightly better than the Standard & Poor’s Indus-
trial Index. But within f ive years, the Post’s return on equity doubled.
By then, it was twice as high as the S&P Industrials and 50 percent
higher than the average newspaper. Over the next ten years, the Post
Company maintained its supremacy, reaching a high of 36.3 percent re-
turn on equity in 1988.
These above-average returns are more impressive when you observe
that the company has, over time, purposely reduced its debt. In 1973,
long-term debt to shareholder’s equity stood at 37.2 percent, the second
highest ratio in the newspaper group. Astonishingly, by 1978, Katherine
Figure 7.2 The Coca-Cola Company market value.