Investing Information

Coca-Cola - A Value Stock?

There has been much talk lately about Coca-Cola and its potential as a value stock - as it now spots a dividend yield of 2.6% (which is the highest dividend yield since the late 1980s) and a P/E or less than 21 - right at the bottom of its five-year low. Moreover, the current price of approximately $43 a share is also near the bottom of its nine-year range - (nine years ago, the last former great CEO of Coke, Roberto Goizueta, was still at the helm of the company). Sure, Coke has had its own set of problems, but it is a great company, they would argue - and heck, Warren Buffett is also an owner of Coke shares.

Don't get me wrong. I really like Coke as a company. Its brand is as American as can be, and yet over 70% of all its sales are derived from outside of North America. The country with the highest consumption per capita of Coca-Cola is Mexico. According to, the brand name of Coca-Cola is worth approximately $67 billion and is the world's number one brand name. Who could forget the famous declaration of Coke's patriarch, Robert Woodruff? When the United States made the decision to enter World War II, he placed his hand on his heart and famously declared that he would "see that every man in uniform gets a bottle of Coca-Cola for five cents wherever he is and whatever it costs." Of course, it didn't hurt that Woodruff's friend, General Dwight Eisenhower, was a great promoter of Coke as well. By the time the war ended, hundreds of thousands of fighting men and women became a fan of Coca-Cola for the rest of their lives.

Under the leadership of Goizueta, Don Keough, and Doug Ivester, Coca-Cola emerged as a growth and must-own stock during the late 1980s and up to the mid to late 1990s. Keough was the great motivational speaker, while Goizueta was unmatched in his ability to "manage" the stock price and the Wall Street analysts who covered the non-alcoholic beverage industry and Coca-Cola. Goizueta had a habit of watching the stock price of Coca-Cola on an intraday basis on a computer in Coke's headquarters. When Warren Buffett was buying shares of Coca-Cola back in 1988, he and Keough figured it out by watching the action of the trading and tracing those purchases to a broker based in Omaha. Ivester, a former accountant, could have been regarded as a great financial alchemist. Under the financial leadership of Ivester, Coca-Cola bought out many of its bottlers and named the entity as Coca-Cola Enterprises. The bottler went public in November 1986.

When Coca-Cola Enterprises (CCE) went public, Coca-Cola (the company) owned 49% of its outstanding shares. Because of this, Coca-Cola had the ability to raise syrup prices at will (the former agreement mandated that Coca-Cola only adjusted its price to match inflation for its syrup in the North American market) - thus squeezing the profit margins of the bottler but increasing its own revenues and profits. The stroke of genius was this: Because of the fact that Coca-Cola only owned 49% of CCE, it did not have to consolidate any of its financial statements with CCE. At the time, not one single analyst totally understood this relationship. Year-after-year, the company delivered. Goizueta carefully (personally) managed all the information that came out of Coca-Cola. He would personally call Wall Street analysts. Any analyst that dared to question him openly or disagree with Coca-Cola's earnings projections would be rebuffed. One such analyst was Allan Kaplan from Merrill Lynch, who at one point wrote a note to his clients observing that Coca-Cola may be depending on Japan for too much of its profits. When Goizueta found out about the note, he responded angrily with letters to both Kaplan and his bosses at Merrill Lynch. Kaplan was banned from attending analyst meetings at Coca-Cola for more than a year. From that point on, analysts knew not to mess with Goizueta and Coca-Cola.

Keough officially retired in 1993 while Goizueta passed away in October 1997 - succumbing to lung cancer. Ivester succeeded as CEO but behind the scenes, the company was in disarrays. People loyal to Keough and to Ivester clashed - with the former group bearing the brunt of the hardship. The current CEO, Neville Isdell (who was loyal to Keough and the only true competitor for the top job back then) was sent into "exile" to Great Britain to head up a bottler. According to a recent Fortune article, "The biggest problem [with Ivester], though, was his tin ear. Ivester was high in IQ but terribly short on EQ. A self-made, stubborn, very shy son of North Georgia millworkers, he had gotten where he was through brains and hard work. He resented Keough's grandstanding, say people who knew him well, and never fully appreciated the importance of Goizueta's almost daily chats with directors. (Ivester declined to comment.) Before long, head-down and full tilt in a turbulent market, Ivester had alienated European regulators, executives at big customers like Wal-Mart and Disney, and some big bottlers, including Coca-Cola Enterprises (on whose board sat Warren Buffett's son Howard). As he raced to put out fires, he became increasingly isolated from his own board of directors. One person was keeping in touch with them, though, even in his retirement-Don Keough."

By December 1999, Ivester was out as CEO, after board members Warren Buffett and Herbert Allen told him that they have lost confidence in his leadership. If anything, the next CEO Doug Daft fared even worse than Ivester. Daft, an Australian and who ran Coke's Japanese operations, did not have a clue about the culture in Atlanta. In a sort of retaliation for Ivester's handling of Keough's loyalists, he also made many of Ivester's favorite executives leave the company. He also looked for quick fixes - for example, by trying to boost Coca-Cola's profitability by simply reducing headcount. By May of last year, Daft was out as CEO, and Neville Isdell - a former darling of Keough - came out of retirement to run Coca-Cola.

Described as "charismatic," Isdell may be the best man for the job, but it is still too early to see what he can do at this stage to revitalize the brand. Under the leadership of the trio of Goizueta, Keough, and Ivester in the 1980s and much of the 1990s, the shares of Coca-Cola were a must-have and Coca-Cola was regarded as a growth stock. Please also keep in mind, however, that the run of KO during that time also occurred in the midst of the greatest bull market in U.S. stock market history.

Again, readers should recall that I have always contended that we are still in a secular bear market - a bear market not unsimilar to the 1966 to 1974 secular bear market. While indices such as the Dow Industrials, Transports, the S&P 400 and S&P 600 have recovered nicely since the cyclical bear market bottom in October 2002, large caps such as Coca-Cola, Microsoft, or even GE have never really covered, and it is my belief that large caps will continue to underperform once the bear reasserts itself sometime this year. The dividend yield of 2.6% may or may not help, but who would want to hold a "value stock" once the Fed Funds rate is greater than its dividend yield (as of right now, the Fed Funds rate is 2.5%)? I really do not see deep value here. While a P/E of 20 is at the low end of its five-year range, it is interesting to note that Warren Buffett started buying his shares of Coca-Cola in 1988 when the P/E was only 13 (with a market cap of less than $15 billion) - and analysts at the time were proclaiming the stock to be expensive! S&P currently projects a fair value of Coca-Cola at $46, so there is really not a great margin of safety here.

While I believe Coca-Cola is a very strong brand and should be a part of every investor's long-term core holdings, I do not believe it is a good time to buy at this point. The growth in the stock price of KO was neither due to luck nor coincidence - it was due to Goizueta's shrewd management of the stock price, Keough's salesmanship of the company, and Ivester's financial genius - along with a roaring bull market more than anything else. Despite the lack of leadership in Coca-Cola during the last seven years, part of the old dream of KO being a growth stock has still hung on - for far too long. For KO to be an attractive stock once again, this author will need to see a more compelling valuation, such as a stock price of $25 to $30 a share. At some point, however, I believe KO may be a glamour stock once again (as it still has a lot of potential in China and India where only a total of about 850 million cases of Coke finished products were shipped in 2004, compared to 20 billion cases for the entire world), but not until some of the weak hands have been shaken out from the stock.

Please let us know your thoughts and opinions. Is KO a buy, hold or sell?

Henry To, CFA is the managing member of Independence Partners, LP, a SEC registered hedge fund. He is also editor of the investment website,

Investing Articles from
03/18/2018 10:05 PM
The ADX Is a Great Indicator That Every Trader Should Know
Trend indicators are critical to the success of any trade. The ADX is a popular trend indicator that every traders should consider using.
03/13/2018 08:00 AM
These Are the 6 Best Indicators You Should Know
Every trader should have various indicators handy in their tool box to implement their trading strategy. These 6 indicators should be an integral part of every trader's toolbox.
03/13/2018 07:58 AM
This Old Indicator Still Rules As One of the Best Indicators Used Today
MACD is an oscillating indicator that has been used for more than 40 years. This indicator is as effective today as it was when it was first introduced. Many traders today use the MACD to determine their entry and exit points on their trades.
03/08/2018 11:11 AM
5 Alternative Investment Approaches
No matter whether you're a full-time investor or a beginner, smart investment can be a safe and liberating activity that reminds us the importance of taking a risk. However, the risk must be calculated. This article focuses on different approaches that can be considered while making safe and ROI centric alternative investments.
03/08/2018 09:38 AM
What Is YOUR Government Going to Do About Crypto?
Many nations are now actively considering what to do about crypto currencies (CC's), as they do not want to miss out on tax revenue, and to some degree they think they need to regulate this market space for the sake of consumer protection. Knowing that there are scams and incidences of hacking and thievery, it is commendable that consumer protection is being thought of at these levels.
03/07/2018 09:34 AM
Here's What Happened the Last Time the US Applied Steel Tariffs
While Donal Trump says "Trade wars are good, and easy to win," history suggests otherwise. In March 2002, George Bush gave into lobbyists and slapped on steel tariffs of between 8% and 30% on imported steel.
03/03/2018 06:36 PM
How to Use Volume Oscillators and Trend Indicators to Make You Money
By using just a trend indicator to determining when to enter a trade, you are only seeing one half of the necessary information to make that trade. A volume oscillator will help you corroborate whether a trend is indeed developing and whether you should enter a trade.
03/02/2018 09:19 AM
Acceptance and Volatility - Are They Related?
Governments and institutions all over the globe are increasingly paying attention to Crypto Currencies (CC's) and the technology that underpins them all - Blockchain. Some of the attention is negative, but on balance, it is clear that more and more of the attention is positive, supportive, and exploitive.
03/01/2018 11:47 AM
The Significance of Thematic Investing
Index Services are dominating the investment markets from quite a long time by now. People who have the preference for diversity when it comes to investment are venturing towards the Thematic Investing.
02/20/2018 09:55 AM
Bitcoin Thrives Against All Odds
Bitcoin's nine-year ascent has been marked with enormous bouts of volatility. As I noted last week, there was an 85% correction in January 2015, and a few others over 60%, including a colossal 93% drawdown in 2011.
02/19/2018 09:20 AM
The Dollar Could Easily Get Stronger
Risk and returns are related to each other. Higher risks mean higher returns. There are millions of examples of this rule. Well, there's an old saying that there's an exception to every rule...
02/13/2018 09:36 AM
Visa Says You Can Buy Almost Anything, Except Crypto Currencies
The news this week is that several banks in the USA and the UK have banned the use of credit cards to purchase crypto currencies (CC's). The stated reasons are impossible to believe - like trying to curtail money laundering, gambling, and protecting the retail investor from excessive risk.
01/26/2018 09:21 AM
The "Experts" Are Getting Crypto All Wrong
The crypto-token ether sure seems like a currency. But ether isn't a currency. Because most people who trade it don't really understand or care about its true purpose, the price of ether has bubbled and frothed like bitcoin in recent weeks.
01/18/2018 03:07 PM
How to Make Informed Investments
Want to know the best way to ensure safe investing with high yields? I could talk all day about it!
01/18/2018 03:07 PM
Let Us Help You Become More Profitable
Many of our clients are young individuals that would consider themselves fairly educated investors. But being educated on the stock market or on the bond market simply isn't enough to ensure that your current and future investments give you the return that you are seeking.
01/11/2018 11:29 AM
5 Best Commodity Market Ideas
Commodity markets are a little different in terms of trading from traditional equity markets and thus, here are 5 best commodity market ideas that can work in India: Cautious to negative on MCX crude OPEC is finding it increasingly difficult to influence crude prices, which means that MCX crude could come under pressure. Moreover, Russia has joined the OPEC consortium in terms of cuts in crude supply.However, the US appears to enjoy a few clear distinctive advantages in terms of expansion in crude supply.
01/08/2018 11:18 AM
Top 5 Benefits of Investments
Going for savings is an option but not the best options available. Here we are going to discuss some of the major benefits that a person gets while investing. Let us quickly summarise everything in order to understand its benefits over savings.
01/08/2018 10:25 AM
What Is Bitcoin and the Blockchain and Why It Is Important to Invest Now
Bitcoin and blockchain technology is quickly becoming a big player in global finances, making everyday people wealthy. It is important to know about this.
12/27/2017 03:10 PM
Essentials To Make An Investment Portfolio
Investing is not a game. Not for the weak hearted. Stock markets move up and down. One cannot just predict the market.
12/27/2017 09:34 AM
Platinum Prices Will Soar in 2018
Despite a six-year decline in the price of platinum, it wouldn't surprise me to see platinum prices rise 25% next year. Here's why it will happen.
12/17/2017 10:01 PM
The 3 Biggest Investments - Understanding the 3 Biggest Investments You Will Ever Make
All investments have risk. Some investments can be handled without much thought and you may lose or earn a few buck here or there. However, there are 3 investments you are most likely going to make in life, that you do not have any room for error with! Check out this article and become familiar with these investments and start investing like a pro!
12/17/2017 10:00 PM
Invest In Yourself - The 3 Best Reasons To Invest In Yourself
There is an endless amount of reasons you should invest in yourself and the power of doing this has been proven over and over again through time. Every person in which has created success will express endlessly to anyone the power of investing in yourself. Because it works! Check out this review over the 3 best reasons to invest in yourself starting immediately!
12/06/2017 02:34 PM
The Role of Foreign Investment in Tourism Development
The decision to invest is one of the most difficult economic decisions and the most dangerous, because it is associated with many factors and variables, which are often difficult to predict their behavior and trends of development. Foreign investment is the vital and effective element to achieve economic and social development, as any initial increase in investment will lead to double and cumulative increases in the interior through the so-called investment multiplier, and an increase in income must go part of it to increase investment through the so-called accelerator. The investment has received great...
12/04/2017 10:20 AM
Here's Why the Cryptocurrency Dash Puts Bitcoin to Shame
Bitcoin is just not practical right now. There's another coin out there emerging as a viable candidate to be the new No. 1 cryptocurrency. It's called Dash.
11/10/2017 10:47 AM
How to Vet Your Financial Advisor
The brokerage industry, just like any other industry, has good financial advisors and bad financial advisors. Here are some tools and tips on how to make sure you're getting a good one.
10/26/2017 09:47 AM
How To Choose To Invest In A Company?
In the beginning, every investor has the first question on their mind which is what will be his first step to invest in a company or how to choose a right company to invest and build a portfolio. There are lots of things to understand for an initial investment. You should have good knowledge about its profits and losses. You should also be aware of how long you can successfully stay in the stock market.
10/23/2017 10:04 AM
How to Become Rich Fast: Wealth Accumulation Like Crazy
Here are 13 tips on how to become rich fast through wealth accumulation like crazy. How to become rich fast can be explained in 2 sentences: Your expenditure must be less than your income. Invest the balance wisely and you become rich sooner
10/05/2017 08:24 PM
Wall Street's Secret Language Revealed
Wall Street's everyday language is very difficult for the average investor to understand. They do it on purpose to keep you confused. That's why we created a list of terms and slang commonly used on Wall Street (and explain them to you in Plain English) to make you a smarter investor.
09/30/2017 09:41 AM
The Chinese Awakening of Volvo
The turnaround in the value of the Volvo franchise today. The impact of the Chinese acquisition of this Swedish company.
09/06/2017 11:28 AM
10 Tips to Optimize the On Page SEO
Here we describe top 10 tips to otimize on page SEO for improving your websites. seo stands for search engine optimization, which is used to improve your website.
09/01/2017 10:11 AM
When Should You Borrow Against Inheritance?
The departure of a loved relative is always a sad moment. But after the period of grief and suffering, it is wise to consider how his or her earthly belongings will be shared. In many cases, the fortune the deceased left behind is the only income source for the remaining relatives. And if the process of distributing the money is not straightforward, it can take months or even years before the heir may see a single penny. This is why borrowing against inheritance may be the best option. Find out more about cash advance loans and why they are a good solution.
08/17/2017 03:53 PM
How to Get a 3% Discount Genesis Mining Promo Code
Do you want to get a 3% discount on Genesis mining? Find out what the 3% Discount genesis mining promo code is and learn how to use it.
08/16/2017 12:16 PM
Start an Investment Account - Level IV to Financial Freedom
After you've eliminated your bad debt, you've started a retirement account, and you've saved an emergency fund. It's now time to start the intermediate levels to Financial Freedom and on to Level IV - Investing! There are few things you need to think about determining how you are going to achieve this level. First, do you have the time and inclination to learn about investing? If yes, then you can consider the complex option to this level. If not, then you need to proceed straight to the simple option. For you to be able to take on the complex level, you're going to need to read a few books, understand how to value an investment, and start to understand broad markets like the stock market and the commodities markets. You need to start understanding how inflation (or disinflation), commodity prices, interest rates and their direction, the growth in the economy and public policy affect the markets. So, which option is best for you?
08/10/2017 10:16 AM
Purchase Investment Properties On A Budget Using Crowdfunding
You can earn double-digit returns with minimal funding through the power of crowdfunding. There are many excellent real estate platforms that offer percentage ownership to crowd investors with consistent returns year over year. Read more to learn how.
07/31/2017 04:12 PM
Cloud Mining Contracts - Are They a Good Investment?
What is cloud mining and can you profit from it? This article explains how you can profit from the creation of Bitcoin and Ethereum.
07/31/2017 08:18 AM
7 Reasons Why You Should Invest in a Fixed Deposit
Thinking about investing money in a fixed deposit scheme? Great! There's more than just the advantage of investing for you with this decision. Read on to find out.
07/24/2017 10:08 AM
Home-Cooked Meals Are a Hot Investment
If food prices continue to shift the way they have over the past year, I think we will see more people cooking meals at home rather than going out to eat. And this could be an opportunity to invest in millennials' spending habits...
07/12/2017 03:01 PM
Different Ways Of Investing
Investing is a device for building riches, however it is not just for the well off. Anybody can begin an Investing system, and different vehicles make it simple in any case little sums and add to a portfolio occasionally. Truth be told, separates Investing from betting that it requires investment-it is not a get-rich-speedy plan.
07/11/2017 11:23 AM
Peer-To-Peer Lending, Microloans, and Crowdfunding
The financial crisis has had at least one interesting side effect: the rise of alternative and increasingly creative forms of fnancing. During the economic recession, and continuing to today, credit and other traditional forms of start up fnancing became more diffcult to obtain. As a result, entrepreneurs began looking to newer, less-traditional forms of raising capital that cut out the fnancial intermediaries (banks, for instance) that are typically present in the process.
06/29/2017 03:45 PM
Why Do You Really Need An Investor For Your Business Startup?
Do you have a dream to be a successful entrepreneur or your own boss? What if you have a fabulous plan but lack of funding to implement it? What do you do, give up on your dream? Maybe Yes, but you should never do this.
06/09/2017 09:14 AM
Minimize Investment Risk by Investing in Hedge Funds
Hedge Funds are a method of alternative investing. It is a form of investment where funds are pooled and invested using different investment strategies to generate profits in a financial partnership between the fund manager and investors.
06/05/2017 03:23 PM
Things to Remember While Investing in Art
The Indian art market is divided into two segments - Modern and Contemporary. Modern segment comprises of masters like M F Husain, S H Raza, F N Souza, VS Gaitonde, Amrita Sher Gill and more. Contemporary segment is comparatively young, around last 30 years.
05/08/2017 10:07 AM
Breaking News - Retire Early, Build Wealth And Have More Freedom If You Do This
Old school mentors often use methods from the 1970's and 80's. If you choose to invest in yourself by joining an opportunity, make sure that your mentor uses modern marketing practices to ensure your success.
05/08/2017 09:55 AM
Reduce Your Stake
How do you gauge and reduce your appetite for high risks? Define and determine what is your risk appetite. Always be prepared to learn how much loss to make when setting out on any investment and how to diversify.
04/06/2017 08:14 AM
How to Plan Your Investments
Whether you are an individual or a corporate body planning your investments ahead is of at most importance. As planning your investments means planning your future financial status and meeting unforeseen with ease and confidence it has become life blood that makes your path of hardships a bed of roses. Planning your finances involve planning your inflows and outflows i.e., In short managing the entire flow of funds during a certain course of time.
04/05/2017 09:48 AM
The Weird Reality About Homes in Australia
They are now priced out of reach of the majority of home owners who are trying to get a foot into the market. While thousands remain empty there are also a huge number of investors are holding onto many of these houses and rather than rent them out they are only interested in capital gains. Successive governments are to blame although they repeatedly 'pass the buck' to their former colleagues rather than face up to the crisis that is now in their court.
04/04/2017 09:17 AM
Investing In Yourself: Why You Should Start Investing In Yourself
If you want to achieve your ultimate goals or dreams you will need to invest in yourself and in your future. So, why should you invest in yourself and your future? What are some good ways to begin investing? These answers will be provided in this review over Investing! Be sure to check it out and get the answers you've been asking!
03/29/2017 11:35 AM
10 Essential Investor Tips For Successful Investing
Discover the top ten essential investor tips for successful investing. Whether you're a beginner or seasoned pro, there's the right way to invest into the markets and the other way. Learn how to do it right.
03/13/2017 09:51 AM
The Power of a Penny
But you don't need to head to the rolling hills of the U.K. with a metal detector to make a nice profit in rare and ancient coins. There's actually a much easier way to grow your wealth...
03/06/2017 10:20 AM
The Value of Purchasing Copper Collectors Items
Throughout history precious metals have been hoarded to be the hedge to protect against inflation. Because the US dollar continues to falter enduring an unknown universal economy, precious metals retain their benefit.

home | site map |