In 1988, Warren Buffett told Berkshire Hathaway shareholders that the company would "hold these securities for a long time" after making major purchases, including Coca-Cola. That commitment has lasted decades, with the 400 million shares Berkshire bought from 1994 now representing a nearly $30 billion stake—accounting for almost 9.3% of Berkshire's total holdings, according to the company's filings. This transformation from a $1.3 billion investment to one of the company's largest holdings highlights the power of long-term compounding.
The impact of time on dividends is equally striking. In 1994, Berkshire received just $75 million in dividends from Coca-Cola. By 2022, this had grown to an impressive $704 million. This progression aligns with Buffett’s belief that investing in strong, reliable companies over the long haul leads to substantial returns for investors. As Buffett once noted, if investors "buy good companies and hold them, they’re going to do fine." Coca-Cola's 34-year journey serves as a testament to his strategy of patient, disciplined investing.
Buffett's approach with American Express was similar. While his initial purchases started in the 1960s, the final pieces of this investment were completed in 1995. Much like Coca-Cola, this $1.3 billion investment in Amex has grown into a multi-billion-dollar holding today. American Express is now Berkshire’s second-largest stock position, valued at about $46 billion, representing nearly 22% of the company's portfolio. Dividends have grown dramatically from $41 million in the 1990s to $302 million in 2022, showing a consistent upward trend in returns.
These two major investments exemplify the core of Buffett’s philosophy: identify high-quality businesses with lasting value and allow them time to grow. Both Coca-Cola and American Express have not only seen their stock values rise significantly over decades but have also provided Berkshire with consistent and increasing dividend income. These results reflect the long-term nature of Buffett's strategy, emphasizing stability and growth over short-term gains.
For individual investors, Buffett has long championed the Vanguard S&P 500 ETF (VOO), a tool designed to replicate the performance of the S&P 500 index. This fund gives investors exposure to 500 of the largest U.S. companies and has delivered an average annual return of 15% over the past decade. Compared to Berkshire’s concentrated stock positions, VOO offers a diversified approach that spreads risk across the entire market, making it a practical choice for long-term wealth-building.
One of the key advantages of the S&P 500 ETF is its adaptability over time. As the market evolves and companies change in performance, the fund automatically removes underachieving companies and adds stronger ones. This built-in mechanism ensures continued exposure to growth-oriented businesses. In that way, it mirrors Buffett’s long-standing principle of "buying good companies for long periods of time." For investors looking to build wealth through a steady, reliable method, the ETF represents a powerful option.