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Warren Buffett bought more than $1 billion of Coca-Cola (KO) shares in 1988, an amount equivalent to 6.2% of the company, making it the largest position in his portfolio. The stock market crash of 1987 had created attractive valuations, as all types of stocks were sold off with little regard to fundamentals. Coca-Cola is the dominant company in the beverage industry and has large food holdings as well. Further, Coca-Cola's iconic name and global reach created a moat around its core soft drink product, so Buffett did not have to worry a competitor would come and take away its market share.

The Coca-Cola purchase suggested that Buffett's investing philosophy had evolved from Benjamin Graham and a focus on finding situations in which a company's value exceeded its market price. This adjustment was necessary to account for the growing size of Buffett's portfolio, which made it more difficult to take advantage of market inefficiencies; it also hindered active management and reduced the number of opportunities he could consider that would have a meaningful impact on its performance. The influence of Charlie Munger, the vice chairman of Berkshire Hathaway Corp., and his philosophy of ethical investing also played a part.

Coca-Cola heralded a change in Buffett's approach from "buying bad companies at great prices" to "buying great companies at good prices." Buffett's investment in Coca-Cola grew nearly 16 times over the ensuing 27 years when accounting for dividends. This is an annualized gain of 11%, approximately.

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