Buffett Watch: Coca-Cola's a Keeper

Last week, Warren Buffett's Berkshire Hathaway (BRK.A) submitted its fourth-quarter stock holdings to the SEC.

In the SEC filing, we learned that Berkshire decreased several major positions, including Procter & Gamble ( PG) , ConocoPhillips ( COP) and Johnson & Johnson ( JNJ).

However, Berkshire's 200-million-share-stake in Coca-Cola ( KO) didn't change.

Why?

The following are key insights on Coca-Cola from TheStreet.com.

From Why Buffett Is Sticking With Coca-Cola:

What does the Buffett approach like about Coca-Cola, whose 2,800-plus products include not only Coke but also major brands such as Sprite, Minute Maid, Powerade, Nestea, Dasani and Fanta? A lot. For starters, Buffett has typically seeks out firms that have posted persistent earnings growth over the long haul, and Atlanta-based Coca-Cola's earnings dip this year was its first since 2000 -- and considering the earnings-sapping recession we're in, the 8-cent drop from 2007 to 2008 isn't bad at all.

Secondly, Coca-Cola has $5.76 billion in annual earnings, meaning it could pay off its $2.78 billion in debt in less than half a year, if it so chose. That's just the kind of conservative financing that my Buffett-based model prizes.

Another reason this model likes Coca-Cola is its management.

Read the full version of Why Buffett Is Sticking With Coca-Cola (on RealMoney).

From Coke's Stock Opens Happiness for Investors:

Investors are more favorable to Coke than they have been. The company's stock has fallen only 5.5% this year, making it the Dow's second-best performer.

TheStreet.com Ratings' quantitative model, which examines a company's valuation metrics, financial situation and analysts' consensus expectations of future growth, awards Coke a B-minus, which equates with a "buy" recommendation.

With a dividend yield topping 3.5% and priced at a modest 13.8, Coke's reward grade from TheStreet.com Ratings is a B-plus. Its $9.3 billion in debt and price of nearly five times book value hold the firm's risk grade to a C-minus.

Read the full version of Coke's Stock Opens Happiness for Investors ( TheStreet.com Ratings Report on Coca-Cola).

From Coca-Cola Stock Shows Importance of Control:

How high will Coca Cola shares go in the next month or two or in the next year or two? Although we might be optimistic and expect the stock to move generally higher based on big sales increases in China and India, we have no influence or control over how much a stock moves in our favor.

However, if we decided to buy Coke shares at this level, could we make sure we did not own the stock if it dropped to $30? Yes, because we can use exit strategies that protect us against loss.

We can safely hold Coke until it drops to $39.66, where it might be in trouble and decline further, according to analysis by SmartStops.

Read the full version of Coca-Cola Stock Shows Importance of Control.

Related Video: Coke's direct competitor is Pepsi ( PEP). Here's Jim Cramer's recent take on Pepsi.

Plus, don't miss Cramer's 'Stop Trading!': Pepsi Could Pop and Pepsico Looks for a Better Second Half (on RealMoney).

For more of TheStreet.com's Buffett Watch, don't miss these stories:

  • Buffett Watch: Bad News for HOG
  • Buffett Watch: Berkshire Closes Lower
  • Buffett Watch: Holdings Getting Hammered
  • Buffett Watch: Berkshire Slide Adds to Insults
  • Buffett Watch: Questions for the Oracle of Omaha
  • Buffett Watch: The Oracle Sells America
  • This article was written by a staff member of TheStreet.com.

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