FINANCIAL MARKETS : Buffett Plans Send Coke Stock Higher
One of America’s most closely watched investors, Warren E. Buffett, disclosed Monday that he may sharply increase his stake in Coca-Cola Co.
In a filing with the Securities and Exchange Commission, Buffett’s Berkshire Hathaway Inc., an investment company, said it expects to submit the documents required under federal antitrust laws that would allow the company to increase its holdings to up to 15% of Coca-Cola’s stock. The filing said the stock purchases would be for investment purposes only.
Impressive Gains
Buffett and the Omaha-based Berkshire Hathaway currently hold 23.3 million, or 6.75%, of Coca-Cola’s common shares outstanding. On July 20, Buffett was elected to a seat on Coca-Cola’s board.
Buffett, a billionaire, is noted for making large, long-term investments in companies that he considers undervalued. Over the years he has established a record of impressive gains. Word of Buffett’s filing with the SEC caused Coke’s stock price to jump $4.50 a share on the New York Stock Exchange, where it closed Monday at $68.
Gladys Kaiser, an assistant to Buffett, said that he was out of town and that, in any event, he would keep to his policy of not commenting on his investment plans. She emphasized, however, that the documents required under the Hart-Scott-Rodino Act had not been filed yet and that Buffett had not yet begun making additional stock purchases.
Securities analysts said the announcement didn’t necessarily indicate that Buffett would quickly begin amassing additional big blocks of Coke stock. Joanna Scharf, a securities analyst at Drexel Burnham Lambert Inc., said: “He just wants to have all the documents in place so that he could add at any time when he thinks the price looks attractive.”
Solidifying Position
George E. Thompson, a beverage industry analyst at Prudential-Bache Securities, said Buffett probably regards Coca-Cola as a good long-term investment because of the company’s strong potential growth in the international soft drink market. Thompson said that Coca-Cola is solidifying a dominant position and that its international growth in recent years has been between 8% and 10% annually in terms of volume of soft drinks sold. “Effectively, they dominate that business,” Thompson said.
Thompson said that, given Buffett’s record as a long-term friendly investor, Coca-Cola probably would welcome his purchase of additional shares. “He’s the kind of individual Coke probably wants to have owning their stock,” Thompson said.
Coca-Cola issued a written statement suggesting that, indeed, it is not displeased by Buffett’s announced plans. Referring to Buffett’s initial purchase of the company’s stock, which amounted to 6% in March, Coca-Cola said: “We were delighted when Mr. Buffett made his significant investment in the Coca-Cola Co., and the relationship that has developed since the investment has reinforced that initial positive view.”
Coca-Cola reported July 13 that its earnings for the second quarter were $345 million, up 14% from the same period a year ago. Coke attributed much of the increase to a 15% gain in overseas shipments for the quarter.
