Warren Buffett - Why Coca-Cola is a Great Business

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The buys are when the numbers tell you not to buy a company. You definitely aren't buying a cigar butt business in that case. You will only do that when you feel extremely positively about the product. Buffett has never been to the offices of General Re. Hopefully it actually exists. If you don't know a lot about a business instantly, then you won't understand enough in a month or two. You've got to stay within your circle of competence. It doesn't matter so much how big your circle of competence is. What is more important is that you understand the boundaries and then stay within it. The nice thing about investing is that you really don't have to learn anything new if you don't want to. Quantitatively, you've got to put a price on a business. But that should be a relatively simple manner.

Coca-cola has seen a lot more of its earnings come from international sales. The fact that things are going to be tough for them for the next 3 or 4 years isn't a big deal. It's not going to be tough for them for the next 20 years. It is a bargain product for people given how much of their work day they have to give up in order to pay for it. It is a product that has gotten cheaper and cheaper relative to people's earning power over the years. Cola has no taste memory. You can drink them all day, and the one at the end of the day will taste just as good as the one in the morning. This isn't the case with most foods. People will drink 8 colas per day, but they won't do that with other products. Most people drink 64 ounces of liquid per day, and all of that can be Coca-cola if you want it to.

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