Warren Buffett’s funding in Coca-Cola (NYSE:KO) has been excellent for Berkshire Hathaway since 1994. And there’s a FTSE 100 inventory that I feel has loads of similarities.

It’s Video games Workshop (LSE:GAW) – a inventory I maintain in my portfolio. There’s only one factor that’s holding me again from shopping for extra in the intervening time, however perhaps this can be a mistake.

Model energy

The chance with shares like Coca-Cola and Video games Workshop is that no one strictly wants their merchandise. In different phrases, there’s no cause individuals have to purchase something they make. 

There’s no disputing this threat, nevertheless it hasn’t held Coca-Cola again through the years. The energy of the agency’s model means prospects don’t need to commerce down – even at decrease costs.

Video games Workshop has a equally robust model and its mental property means its merchandise can’t be copied precisely. Its buyer base is loyal, however it’s area of interest and this can be a threat to pay attention to. 

The energy of those belongings shouldn’t be underestimated. Whereas its merchandise are discretionary, its prospects have proved remarkably resilient, even throughout financial downturns. 

Capital mild

Coca-Cola’s asset-light enterprise mannequin is one other large benefit. Outsourcing its bottling operations to native franchisees means it doesn’t should spend money on manufacturing amenities.

This enables it to return its money to shareholders through dividends and Video games Workshop can also be excellent on this regard. The agency recurrently distributes most of its web earnings to buyers.

Importantly, this hasn’t come on the expense of development. During the last 10 years, earnings per share have compounded at a mean of over 30% per yr, which is extraordinarily spectacular. 

Based on Buffett, an exquisite enterprise grows whereas distributing money to shareholders. And Video games Workshop suits that description higher than any UK inventory I can consider.

What’s to not like?

As I mentioned, I maintain Video games Workshop shares. However I haven’t been shopping for it just lately as a result of I don’t suppose it seems particularly low-cost at a price-to-earnings (P/E) ratio of 29.

Am I being too cautious? Buffett has mentioned the underlying enterprise is extra necessary than the share price and to some extent, that is illustrated in Berkshire’s Coca-Cola funding.

Buffett began shopping for Coca-Cola shares in 1988 when the inventory was recovering from a market crash. However the Oracle of Omaha didn’t cease shopping for even when it was 200% greater in 1994.

The corporate’s sturdiness and development potential meant it was nonetheless funding even because the share price was rising. And perhaps I ought to take the same view with Video games Workshop.

Investing like Buffett

As Buffett prepares to retire from Berkshire Hathaway, the investing world has lots to look again on. And I’m attempting onerous to take heed to the Oracle of Omaha’s recommendation with my very own investing.

The excessive valuation does convey real dangers. It means there isn’t a lot scope for something to go improper with a disappointing product launch or an replace.

The underlying enterprise continues to be rising strongly and its aggressive benefit appears to be firmly intact. And that mixture has been a winner for Buffett with Coca-Cola.