Image Source: Getty Images
Warren Buffett’s Investment coca cola (NYSE: KO) is prominent Berkshire Hathaway Since 1994 FTSE 100 There are many similarities in my opinion in stock.
the Game Workshop (LSE:GAW) – Inventory held in the portfolio. There’s only one thing that’s preventing me from buying more at this point, but this may be a mistake.
Brand Power
The risk of stocks such as Coca-Cola and Games Workshop is that no one needs the product strictly. In other words, there is no reason why people have to buy what they make.
I don’t dispute this risk, but I haven’t held back Coca-Cola for years. The strength of the company’s brand means that customers don’t want to trade down.
Games Workshop has an equally strong brand, and its intellectual property means that it cannot accurately copy its products. Its customer base is loyal, but it’s a niche, and this is a perceived risk.
The strength of these assets should not be underestimated. The product is discretionary, but its customers have proven to be significantly resilient even in the economic downturn.
Capital Light
Coca-Cola’s Asset-Light Business Model is another major advantage. Outsourcing your bottling operations to a local franchisee means you don’t have to invest in a manufacturing facility.
This allows cash to be returned to shareholders via dividends and game workshops. The company regularly distributes the majority of its net profit to investors.
Importantly, this hasn’t come at the expense of growth. Over the past decade, earnings per share have increased by an average annual average of over 30%, which is very impressive.
According to Buffett, great businesses grow while distributing cash to shareholders. And the game workshop is more appropriate for that explanation than the UK stocks I can think of.
What do you not like?
Like I said, I have stocks in the Game Workshop. However, I haven’t bought it recently because I don’t think it looks particularly cheap at a 29 price (P/E) ratio.
Am I too careful? Buffett says the underlying business is more important than stock prices, and to some extent this is shown in Berkshire’s Coca-Cola investment.
Buffett began buying Coca-Cola shares in 1988 when the stock recovered from a market crash. However, Omaha Oracle did not halt its purchases even if it was 200% higher in 1994.
The company’s durability and growth potential meant it was still a good investment, even if the stock price had risen. And I should take a similar view in the game workshop.
Investments like Buffett
As Buffett prepares to retire from Berkshire Hathaway, there is much to look back at in the investment world. And I try hard to listen to the oracle of Omaha advice with my investment.
High ratings pose real risk. This means nothing goes well with disappointing product launches or updates.
The underlying business is still growing strong, and its competitive advantage appears to be firmly unharmed. And the combination was the winners of Coca-Cola and Buffett.
