--- title: "Want to Beat the S&P 500? History Says Avoid This Top Warren Buffett Stock" description: "Warren Buffett's top stock pick, Coca-Cola, has underperformed the S&P 500 in the past five and ten years. Its lack of growth potential and high valuation make it unattractive for investors seeking ou" type: "news" locale: "en" url: "https://longbridge.com/en/news/204394557.md" published_at: "2024-05-19T09:13:17.000Z" --- # Want to Beat the S&P 500? History Says Avoid This Top Warren Buffett Stock > Warren Buffett's top stock pick, Coca-Cola, has underperformed the S&P 500 in the past five and ten years. Its lack of growth potential and high valuation make it unattractive for investors seeking outsized returns. However, Coca-Cola is still a high-quality company with a strong brand, steady profits, and consistent dividends. It may appeal to those prioritizing a passive income stream. It's hard to argue with the **S&P 500**'s (^GSPC 0.12%) historical performance. In the past 20 years, the broad index has produced a total return of 610%, translating to an annual average of 10.3%. If you're someone who likes to pick individual stocks, then I'd assume the goal is to try to outperform the S&P 500 over the long term. A good place to look for investment ideas might be **Berkshire Hathaway**'s portfolio. The Oracle of Omaha's conglomerate owns dozens of stocks. But to be clear, not all of them should be purchased, especially if you want to beat the S&P 500. In fact, history says you should avoid this top Buffett stock if outperformance is the ultimate objective. ## Not quenching growth investors' thirst Investors looking to score huge returns should not buy shares of **Coca-Cola** (KO -0.46%). The global beverage giant currently makes up 6.8% of Berkshire's portfolio, behind only **Apple**, **Bank of America**, and **American Express**. In the past five- and 10-year periods, the stock produced a total return, including dividends, that has significantly lagged the S&P 500. That track record points to the fact that Coca-Cola is a mature business that operates in an industry that won't register growth that much better than the rise of global gross domestic product (GDP). That's because non-alcoholic ready-to-drink beverages aren't being consumed in larger quantities on a per-person basis, especially in the U.S. And Coca-Cola already sells its products in more than 200 countries and territories, so there isn't really more room to further penetrate new markets. Coca-Cola's revenue in 2023 was actually slightly lower than what the business reported 10 years before in 2013. On the bottom line, net income rose at a 2.2% annualized pace, thanks to the help of some operating leverage. It's no wonder the shares have been a notable underperformer. If sales and earnings increased at a higher clip, I'm almost positive the stock would have done much better. The valuation also looks expensive. Trading at a price-to-earnings ratio of 25.3, the stock goes for a premium relative to the S&P 500. That seems off to me, particularly when you realize that you'd have been better off just investing in the broader index in recent times. ## A quality business Coca-Cola might not have the potential to put up strong investment returns going forward. But to be clear, the company is still a high-quality enterprise for three very obvious reasons. I'm sure Buffett is familiar with these points. The business possesses one of the world's most powerful brands. This not only results in customer loyalty -- it helps management flex its pricing power. Even better, the brand differentiates Coca-Cola from the large number of rival products on the market. Unlike many companies, especially in the technology sector, Coca-Cola operates in an industry that doesn't invite much in the way of disruption and innovation. And that's a good thing. It means there is a minimal chance Coca-Cola will become irrelevant anytime soon. In other words, the business has durability. It will almost undoubtedly be around 50 years from now. I'll also point to the company's ability to consistently produce operating income and free cash flow, regardless of the economic cycle. Steady profits have helped Coca-Cola raise its dividend in 62 straight years and counting. So, while Coca-Cola might not satisfy investors looking to generate outsized returns, perhaps the stock catches the attention of those who prioritize having a passive income stream. ### Related Stocks - [BRK.A.US - Berkshire Hathaway](https://longbridge.com/en/quote/BRK.A.US.md) - [KO.US - Coca Cola](https://longbridge.com/en/quote/KO.US.md) - [BRK.B.US - Berkshire Hathaway B](https://longbridge.com/en/quote/BRK.B.US.md) ## Related News & Research | Title | Description | URL | |-------|-------------|-----| | 股神巴菲特再現「神準」操作 亞馬遜急跌前大減倉 再沽蘋果美銀 買入一隻媒體股 | 股神巴菲特在卸任巴郡 CEO 後，繼續調整投資組合。根據 SEC 13F 文件，巴郡大幅減持亞馬遜 770 萬股，持倉減少 77%；同時出售約 5,080 萬股美國銀行和 1,030 萬股蘋果，連續第三季減持蘋果。巴郡首次增持傳統媒體股，購 | [Link](https://longbridge.com/en/news/276191227.md) | | 伯克希爾哈撒韋在第四季度購入了紐約時報的股票。你是否也應該將紐約時報納入你的投資組合中呢？ | 伯克希爾哈撒韋在第四季度購買了紐約時報的股票。你也應該將 NYT 加入你的投資組合嗎？ | [Link](https://longbridge.com/en/news/276265837.md) | | 沃倫·巴菲特的收益曾是市場的兩倍——直到監管改變了遊戲規則 | Chamath Palihapitiya 討論了監管變化，特別是 2000 年的公平披露條例（Reg FD），如何影響沃倫·巴菲特的投資表現。在 Reg FD 之前，由於信息不對稱，巴菲特的回報是市場的兩倍。該法規禁止選擇性披露後，巴菲特的 | [Link](https://longbridge.com/en/news/276003396.md) | | Liberty Media Corporation - Liberty Live Series C（納斯達克代碼：LLYVK）的主要股東伯克希爾哈撒韋公司出售了 59,411 股 | 伯克希爾哈撒韋公司（Berkshire Hathaway Inc.），作為自由媒體公司（Liberty Media Corporation）- 自由直播 C 系列（Liberty Live Series C，NASDAQ:LLYVK）的主要 | [Link](https://longbridge.com/en/news/276179913.md) | | Liberty Media Corporation - Liberty Live A 系列（NASDAQ 代碼：LLYVA）的主要股東伯克希爾哈撒韋公司出售了 44,100 股 | 伯克希爾哈撒韋公司（Berkshire Hathaway Inc.），作為自由媒體公司（Liberty Media Corporation）- 自由直播 A 系列（Liberty Live Series A，NASDAQ:LLYVA）的主要 | [Link](https://longbridge.com/en/news/276179925.md) | --- > **Disclaimer**: This article is for reference only and does not constitute any investment advice.