Buffett's All-Time Favorite Stock Is Dropping. What's Going On?

Warren Buffett's Berkshire Hathaway (NYSE: BRKB) has held Coca Cola (NYSE: KO) in the conglomerate's massive portfolio for more than 35 years. The Oracle of Omaha invested $1 billion in the soft drink giant right after the 1987 market crash.

As of September, 2025, Berkshire Hathaway held 400 million shares of Coke, worth about $30.8 billion at today's share price. And the stock made up 9.4% of the portfolio, one of Berkshire's largest holdings.

Suddenly, however, Coke shares are falling. The share price dropped notably in pre-market trading on Feb. 10 -- as much as 2.5% -- and ended the day down about 1.6%, a big drop for Coca-Cola in a single session. What's going on?

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A softening sales outlook sent shares lower

Well, Coke released fourth quarter results this past Tuesday morning and they were mixed. It earned $0.58 a share on revenue of $11.8 billion. The earnings figure bested Wall Street's expectation of $0.56, but the revenue figure was below the consensus analyst forecast of $12.05 billion. So sales growth late in 2025 was a bit slower than expected.

Management gave a less-optimistic forecast of full 2026 sales growth than analysts expected, which was probably worse for the stock. While analysts were looking for a 5% growth forecast by the company, Coke executives instead said growth would be 4% to 5%. It might not seem like a huge difference, but even tiny decreases in expectations can move a stock because they often indicate that management -- which has much more insight about what's going on at the company -- has grown pessimistic.

In addition, Coca Cola is about to undergo a major management change, one that might be making investors slightly nervous. CEO James Quincey is leaving at the end of March and will be replaced by the current COO Henrique Braun.

It's a complicated time for a change in leadership, as the company has increased its offering of beverages, which now include sports drinks and water, to cater to consumers who are increasingly seeking healthier options than full-calorie soft drinks.

Coke, which gets slightly more than half of its total revenue from outside North America, also has to navigate an increasingly tricky global trade environment, with tariffs potentially complicating its financial outlook. There's also a new sugar tax in Mexico that management will need to contend with, too.

To be sure, Coke is not in any significant danger at the moment. The stock is up 10% year to date and almost 21% over the past 52 weeks. Still, the difficulties of rising trade frictions and changing consumer tastes could present challenges for the new CEO.

Matthew Benjamin has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.