How To Count Performance?

Warren Buffett announced today that he was stepping down as a director of the Board of Coca-Cola. http://biz.yahoo.com/rb/060214/food_cocacola.html?.v=3. Buffett who controls his shares through an insurance holding company, Berkshire Hathaway, is Coke's largest stockholder. He owns 8.3% of the company or over 200 million shares. Buffett stated that he has no plans to sell his stock at this time. Buffett purchased shares in both 1989 and 1994. Based on an average "guesstimate" his total cost basis is probably someplace between $13 & $17 per share. For the purposes of this post let's pretend $15.00. In that case we could argue the following.

1. Buffett is a genius and shows the promise & benefits of long term investing. This a great American company. An icon of American business. His gain on these shares (assuming I'm close on the cost basis & using last nights Coca Cola closing price of $40.74) is almost 172%! It is even more if you include the dividend! Warren should hang on to what he has or perhaps buy more if the stock trades down. Over the long term it will be fine.

2. Buffett stayed too long at the party. The stock is a dog and is going nowhere. Besides he left almost 20 points on the table from where it was in 2000. He's down over 50% from its high in 1998! Coke has way underperfomed the market since then as well! He should have dumped this loser when he had a chance!

Well there is no right answer of course because different people have different investment horizons and goals. But how you view both sides of this coin says a lot about how you invest your money & how you look at the stock market.

No individual positions in either Coca-Cola or Berkshire Hathaway.