1 Warren Buffett Stock to Buy Hand Over Fist and 1 to Avoid

Warren Buffett had a simple investment approach: Buy well-run companies when they are attractively priced and hold for the long term. But even Buffett, the longtime former chief executive officer of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B), made mistakes. Which is why Greg Abel, Buffett's successor, is planning to dump Kraft Heinz (NASDAQ: KHC). But Coca-Cola (NYSE: KO) is still in the portfolio and isn't likely to be dropped anytime soon.

Follow Abel's lead

Buffett got involved in the Kraft Heinz company before the merger of those two iconic food brand names. In fact, he supported the merger that created the entity. Only the original plan to increase earnings by cutting costs didn't pan out as well as hoped. After struggling for years to turn the business around, Kraft Heinz has decided to abandon the merger and split itself in two again.

Image source: The Motley Fool.

Merging two struggling companies didn't make one good company. And breaking up one struggling business isn't likely to make two good companies. Greg Abel has signaled he's moving on from Kraft Heinz, and you may want to, as well. There's just no clear indication that the breakup will be a catalyst for better financial performance. Still, this is a good reminder that even great investors like Buffett aren't infallible.

Coca-Cola is a reliable Dividend King

One stock you may want to buy, however, is Coca-Cola. It is a longtime holding for Berkshire Hathaway. Although Buffett bought the stock decades ago, the business remains one of the best-performing and largest companies in the consumer staples sector. Add in a well-above-market 2.6% dividend yield, and there's a lot to like about Coca-Cola.

However, right now, the most attractive thing is the stock's reasonable valuation. The yield is about average, historically speaking, and the price-to-earnings ratio is a touch below its five-year average. Although Coca-Cola is hardly a screaming buy, a fair price for a great company is usually a pretty good deal. Notably, the stock is one of the most reliable dividend payers on Wall Street. Its streak of annual dividend increases, extending to more than six decades, gets it into the elite category of Dividend Kings.

One to avoid, one to buy

With the market trading near all-time highs, it pays to err on the side of quality. Kraft Heinz is struggling, and the planned business split probably won't improve things much. Coca-Cola, however, is an industry leader that still looks reasonably priced. That's likely to be a much better option for most investors.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.