KO - Coca-Cola Company

[valueinvesting101]

I know lot of people on board have position in WFC which is now Berkshire's biggest position. But no one talks about KO as investment opportunity. Does anyone on board has been following KO for investment? It might be good choice to buy into during period of uncertainty or panic and sell on rallies or just keep nibbling at it during whenever price becomes attractive.

 

Returns since last couple of years have been 15.7% in capital appreciation + around $2 in dividend + company has bought back 220 million shares in 7 quarters from Q1 - 2011 to Q3 2012 so around 5% increase in ownership.

 

[valueinvesting101]

Also has Warren ever stated reason for not increasing KO position ? Is it due to Howard Buffett being board member there?

[Palantir]

Why do you feel this is a good investment? I understand being a WEB investment people always cite it as "great", but I see a strong chance of coke consumption declining. Eg. I stopped drinking coke.

[original mungerville]

During the financial crisis Munger mentioned that it was a pretty good deal at the then current price. I put 50% of my portfolio into it then. Have since sold it off (a year or more ago). Maybe if the price comes down again I would buy it again.

[Guest wellmont]

this would be a great investment if you could lever it up like buffett is doing with hnz. but you can't. you could do a lot worse as an investor. but value investors should be able to do a lot better.

[woltac]

KO will grow sales, but probably not soft drink sales in the US.  Unit soft drink growth will be in other countries and KO will grow their other brands.  The company has great economics, which are currently reflected in the price.  I have a small position purchased many years ago that I keep mainly to track the stock price and receive the annual report in the mail. 

[CanadianMunger]

I loaded up during the crisis - it's now my second largest position after Berkshire. 

 

I sleep pretty good at night.

 

I'm not selling until the market cap hits at least two trillion (ie.  Munger's essay Turning 2 million into 2 trillion) :)

 

-CM

[bargainman]

this would be a great investment if you could lever it up like buffett is doing with hnz. but you can't. you could do a lot worse as an investor. but value investors should be able to do a lot better.

 

Well you can always lever up using leaps, but that's not the sweetheart deal Buffet gets.

[Shawn]

During the financial crisis Munger mentioned that it was a pretty good deal at the then current price. I put 50% of my portfolio into it then. Have since sold it off (a year or more ago). Maybe if the price comes down again I would buy it again.

 

What was the P/E & P/B when you bought it ??

 

I've been looking very closely at KO & AXP as of late.....

 

Curious to hear your input & reasoning behind your purchase friend.

[Charlie]

I bought Coca-Cola during the crisis for my parents near the 10-year low.  :)

 

I remember the comment from Munger, when he would manage individuel portfolios, in every portfolio would be Coca-Cola. Some years ago he called it the best large cap company of the world.

 

Somehow I forget to buy it for my own portfolio.  :(

[savant]

 

I remember the comment from Munger, when he would manage individuel portfolios, in every portfolio would be Coca-Cola.

 

Any chance you recall when he made this comment?

 

Thanks

[Charlie]

probably one of the last DJCO meetings, but I´m not sure...

[Redskin212]

KO increases dividend by 10%

 

 

http://www.cnbc.com/id/100480503

[constructive]

I remember the comment from Munger, when he would manage individual portfolios, in every portfolio would be Coca-Cola.

 

Presumably the investment thesis has changed at least a little bit in the intervening 37 years.

[stahleyp]

Nothing new but just another reason why I don't drink soda.

 

http://shine.yahoo.com/shine-food/are-junk-food-makers-worse-than-tobacco-industry-giants--how-fritos--coke-and-lunchables-vie-for-addicts--210753546.html

 

"•Coca-Cola, under fire from anti-obesity campaigns and other health initiatives in the late ’90s, began aggressively marketing its sugary drink to poor, vulnerable areas, Moss writes, “like New Orleans — where people were drinking twice as much Coke as the national average — or Rome, Ga., where the per capita intake was nearly three Cokes a day.”

 

•Coke also targeted Brazil and its ultra-poor favelas, by repackaging the soft drink into smaller, more affordable bottles. On one trip to Brazil, Jeffrey Dunn, then-president and chief operating officer in both North and South America, had a realization, he told Moss. “A voice in my head says, ‘These people need a lot of things, but they don’t need a Coke.’ I almost threw up.” He tried steering the company in a more health-conscious direction, but was fired. In recent years, Dunn’s worked to market carrots as a snack. “I’m paying my karmic debt,” he explained.  "

[ItsAValueTrap]

If you look at the rising rates of obesity, it seems that people have a very hard time avoiding obesity.  There are numerous scientific studies on weight loss.  Basically:

- Almost any diet will work.  High/low carbs/protein/fat... subjects will lose weight on all diets.  Some diets are a little more effective than others.

- Subjects lose weight in the beginning but will slowly gain it back over the years.

- There is wide variation... some people lose weight and keep it off, others gain weight and keep it on.

 

At the end of the day, I don't think that most human beings will be able to fight the allure of Coke.  There is also Diet Coke... which has a different but still seductive allure that people will also have a hard time fighting.

 

2- Any big corporation or anybody with status will have its haters.  There are people who criticize Warren Buffett... e.g. he dodges taxes through deferrals, invested in Moody's and Goldman (companies which contributed to the subprime crisis), etc. etc.  I'm not sure I'd take all the haters seriously.

[stahleyp]

Does anyone ever say that Berkshire and their business models make them "throw up" who actually works there? Maybe they have but I haven't heard anything like that.

 

I've been doing the "paleo diet" thing for a few months now and it works better for me than vitually anything else. I ate a super healthy diet, but a lot of bread. I cut that out and now my love handles are almost gone. :) Though...that was probably more than you guys needed, or wanted, to know.  :P

[rockket]

glanced through their filings - do we know what % of revenue unhealthy sodas actually represent?

[CanadianMunger]

I remember the comment from Munger, when he would manage individual portfolios, in every portfolio would be Coca-Cola.

 

Presumably the investment thesis has changed at least a little bit in the intervening 37 years.

 

I don't think the thesis has changed much.  I think Buffett mentioned that KO is a royalty on swallows.  Maybe more of those swallows are less sugary than they used to be but they are still swallows :)

 

-CM

[valueinvesting101]

WEB did address this question of not buying more of KO. He said WFC and IBM are better value currently. But CM did seem to have different view during turmoil of 2009-09.

 

 

 

 

[compoundinglife]

Does anyone ever say that Berkshire and their business models make them "throw up" who actually works there? Maybe they have but I haven't heard anything like that.

 

I've been doing the "paleo diet" thing for a few months now and it works better for me than vitually anything else. I ate a super healthy diet, but a lot of bread. I cut that out and now my love handles are almost gone. :) Though...that was probably more than you guys needed, or wanted, to know.  :P

 

I have adjusted my eating style to more along the lines of paleo/low-carb and have noticed a big difference in weight and energy levels. I think over the next 5-10 years you are going to see society realize that our common knowledge about proper nutrition has been flawed for quite a while. A great book along those lines is this one:

http://www.amazon.com/Art-Science-Low-Carbohydrate-Living/dp/0983490708

 

That being said I think KO will adapt and provide the beverages people want or a large portion of the population will still consume sugary drinks even though they are not good for you or more than likely they will do both of these things. Look at their purchase of Honest Tea. Even if they drop the ball for a while they still have a strong enough moat to recover.

[bookie71]

They are already adapting, they sell that stuff you get out of your faucets at home.  :-)

[ItsAValueTrap]

I believe Coca Cola actually put a lot of R&D into Dasani water.  Look at the ingredients... there are things other than water (ozone to kill bacteria, and salt to make the taste "better").

 

I slightly dislike the taste of it though.  (I don't like the taste of filtered water either.)

[compoundinglife]

They are already adapting, they sell that stuff you get out of your faucets at home.  :-)

 

Yup Dasani, thats why I brought up Honest Tea as an example, but things will continue to change and they will continue to adapt (acquire or create new products) accordingly, sometimes slower, sometimes faster but if their moat is strong the times they lag should not have a noticeable impact over the long term.

 

List of Coke brands from their website:

http://www.coca-colacompany.com/brands/all

[compoundinglife]

I believe Coca Cola actually put a lot of R&D into Dasani water.  Look at the ingredients... there are things other than water (ozone to kill bacteria, and salt to make the taste "better").

 

I slightly dislike the taste of it though.  (I don't like the taste of filtered water either.)

 

Heh, funny you should mention that. Dasani is always my last resort when buying bottled water at the store.