Coke Stock: Where Buffett and I Diverge
May 9th 2013 7:00PM
Updated May 9th 2013 8:30PM
I got into investing when I read Warren Buffett's biography, The Snowball. Our personal investing styles don't exactly match, and Coca-Cola -- one of Buffett's largest holdings -- isn't exactly my ideal investment. But two years ago, while carving out my retirement portfolio, I included Coke stock because of its brand, dividend, and financial fortitude -- all traits Buffett looks for.
My original pledge to put $4,000 behind the stock has worked out well. That investment now stands at $5,355 -- or about $120 more than if I had invested in the SPDR S&P 500 ETF.
But, after some careful consideration, I'm afraid that it's time for me to part ways with my Coke stock. There's nothing wrong with the company's brand, dividend, or balance sheet. The problem is that it bugs me that I'm profiting from a company that's helping add to serious health problems in our country and world.
An important caveat
I first voiced my concerns with owning Coke stock two months ago. As I said in that piece, "I'm not here today to tell you what should or shouldn't be your moral investing compass -- that's a very personal decision that every investor needs to make for him- or herself."
There's nothing wrong with owning Coke stock.
But there is something wrong with owning something that makes you lose sleep. Indeed, in his 2008 letter to shareholders, Buffett himself said, "I will not trade even a night's sleep for the chance of extra profits."
With my wife and I expecting our first child this summer, we've already agreed that beverages sweetened with sugar or high fructose corn syrup -- HFCS for short -- are off the table. Neither of us drink them now, and we don't want them for our child. So the thought of pinning our retirement on the sales of these products just doesn't mesh with our own personal beliefs.
Digging deeper into the problem
The Centers for Disease Control and Prevention has assembled what might be the most alarming visual to put our obesity problem in perspective. Take a look: Back in 1990, fewer than 15% of Americans were considered obese. Today, that number is much higher.
Of course, it wouldn't be fair to say that all of this is due to Coke and its products. But it would also be naive to think the company's products didn't have something to do with it. The amount of sugar (or HFCS) Americans consume has increased 17-fold in the last 200 years, and soda has played a central role.
Indeed, as people have become aware of these effects, Coke has acknowledged that soda sales are slumping in developed economies.
At first, I thought of holding shares, as Coke stock represents more than just the company's signature Coca-Cola product. And I will give credit where credit is due: The company's Odwalla juices and Simply Orange products only contain sugars naturally occurring in fruit. And the company's Dasani and SmartWater brands are simply bottled waters.
But the company's VitaminWater and Fuze Tea contain crystalline fructose in heavy doses, and its Minute Maid juices have lots of HFCS. When these products are considered along with all of the different sodas that Coke owns -- including Sprite, Fanta, Fresca, and Mellow Yellow -- there is simply too much here that I'm not comfortable with.
Where to go from here?
Within the month, I will be investigating possible replacements for the slot that Coke stock occupies in my retirement portfolio. But, as I said from the outset, there's nothing wrong with owning Coke stock. It's just not a position I'm personally comfortable with.
The article Coke Stock: Where Buffett and I Diverge originally appeared on Fool.com.Fool contributor Brian Stoffel owns shares of Coca-Cola, but will be selling them when he picks a replacement stock. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.