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Warren Buffett found Coca-Cola an attractive investment because it had a moat and was attractively valued. Buffett began building his position following the stock market crash in 1987. Coca-Cola is the dominant company in the beverage industry and has large food holdings as well.

Buffett's investing philosophy evolved from Benjamin Graham and a focus on finding situations in which a company's value exceeded its market price. This evolution was due to the influence of Charlie Munger and the larger size of Buffett's investable funds, which made it more difficult to take advantage of market inefficiencies.

Buffett bought more than $1 billion of Coca-Cola stock in 1988, an amount equivalent to 6.2% of Coca-Cola, making it the largest position in his portfolio. The stock market crash in 1987 created attractive valuations, as all types of stocks were sold off with little regard to fundamentals. Further, Coca-Cola's iconic name and global reach created a moat around the product, so Buffett did not have to worry a competitor would come and take away market share.

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. Coca-Cola heralded a change in Buffett's approach from "buying bad companies at great prices" to "buying great companies at good prices." This adjustment was necessary to account for the growing size of Buffett's portfolio, which hindered active management and reduced the number of opportunities he could consider that would have a meaningful impact on performance.

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