It’s a permanent holding.

And the business continues to thrive 36 years later. Still generating cash, still paying Berkshire annual RISING streams of income.

That’s what Buffett wanted. Markets will do what they do and mark how they mark. Those bigger dividend checks every year are REAL MONEY and Coke’s growing net worth is all that really matters. All that one can ask. It’s all one could rationally forecast and expect.

I would say respectfully that that is not all one could ask for.

First, Buffett himself has said it was an error to not sell when it was at 50x earnings 25 years ago (1998): "You can definitely fault me for not selling the stock." YouTube: Warren Buffett regrets not selling Coca Cola at 50x earnings (Thomas Chua (Steady Compounding)). (That was in 2006. To be fair, in he has also said (in 2015) that he would probably never sell: We own 400m shares of Coca-Cola stock, we've never sold a share, and I wouldn't think of selling a share." YouTube: Warren Buffett On Why He'll Never Sell a Share of Coke Stock (The Coca-Cola Co.) Hmm, seems like he did once think about it...)

Second, the point is not that markets are not behaving properly - it's that Coke's earnings have not increased very much. Markets have quite appropriately not sent the price of shares up more than that small increase in earnings, and have corrected the overpricing that Buffett regretted missing.

Third, the fact that the dividend checks get bigger every year and that they are well reinvested elsewhere doesn't entirely compensate for the fact that it has been an unrewarding holding for over a decade. Another holding with bigger increases in dividend checks and more money to reinvest in other investments would have been better.

Of course there are real permanent holdings, like See's, that may have had earnings that have not increased very much, but these are different, since they allow Berkshire to control the allocation of capital and, for a company that is not growing, reallocate ALL the earnings, not just the percentage that are paid out in dividends. Admittedly, Coke appropriately pays out most its earnings as dividends, but Berkshire pays a lot more tax on these payouts than they would for a fully owned holding.

Fortunately, the sales of much bigger stock holdings like Apple and Bank of America suggest that just Berkshire now believes that no stock holding is so big that it can't be sold.

dtb