Coca-Cola was a historical mistake to hold
The guest argued that Warren Buffett made a mistake by never selling Coca-Cola after its valuation multiple ballooned to 58 times earnings in the late 1990s.
The argument
The guest explained that after compounding at 36% annually in its first decade, Coca-Cola's growth slowed to 3% to 3.5% and the stock compounded at just 4.5% annually over the subsequent 28 years. He argued that Buffett's recent sale of Apple was a direct effort to avoid repeating this mistake of holding a low-growth business at a high multiple.
The thesis, stress-tested
✓ What validates it
- ✓Apple's future growth and valuation multiple mimicking Coca-Cola's post-1998 stagnation
▸ Risks discussed
- ▸High capital gains taxes can make selling large, low-basis positions disadvantageous
Hear it yourself
"And in the first ten years, nine and a half or ten years going into '98, Coca Cola, the stock compounded at 36% a year or something like that. Revenues were growing at 9% a year."
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