KO - Coca-Cola Company

[fareastwarriors]

http://www.bloomberg.com/news/2013-04-24/buffett-tells-coke-ceo-to-study-failure-to-avoid-complacency.html

 

 

Buffett Tells Coke CEO Study Failure, Avoid Complacency

 

[Grenville]

Apparently he was a special guest at the Coke AGM today. Buffett had a 20 minute conversation on stage with Kent!

[Grenville]

Here is a link to the video/webcast. Warren is on about 20mins in.

 

http://www.coca-colacompany.com/investors/annual-meeting-of-shareowners

 

windows media link

http://mfile2.akamai.com/9538/wmv/estream.download.akamai.com/9538/cocacola/cocacola_160isl_2013_annual_meeting_of_shareowners.wvx?obj=20130424v1

[Kiltacular]

fareast / grenville,

 

Thanks for posting all those links.  It's embarrassing at my age to admit that I still get so much enjoyment listening to Buffett's simple and profound insights.

[dcollon]

Thanks for posting the link. 

[boilermaker75]

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.)

 

I did not know that about salt in Dasani water. My wife and daughter like Dasani,  but I don't. Now I understand why. I never add salt to anything, my wife does.

[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.)

 

I did not know that about salt in Dasani water. My wife and daughter like Dasani,  but I don't. Now I understand why. I never add salt to anything, my wife does.

 

I generally have not been a fan of Dasani. I think I was turned off by the fact that it tends to bubble when you open it. Gave me the impression it was not just water. Did not know about the salt, that is interesting.

[boilermaker75]

I’m surprised there is no thread for KO, maybe because everyone feels they have enough exposure to KO through BRK? I am starting one because I have been writing puts and acquiring some KO.

 

The market cap is  $180.1B, the EV $193.8B, and the dividend yield 2.8%.

 

EV/(TTM FCF) = 24.4.

 

Gross margins are 63% and operating margins 25%.

 

Return on equity is 27% and retained earnings have grown from $26.7 billion to $58 billion, and stockholders equity has grown from $14.1 billion to $32.8 billion over the last 10 years while diluted shares have decreased from 4,924 million to 4,566 million.

 

The TTM PE is 20.8, which is on the lower end of what the PE has been the last 10 years, other than in 2010 when it dipped to 13.

 

I have a few shares that I was put to at 40 in June. I am short puts with strike prices ranging from 38 to 40 and expirations on 6/28 and 7/20.

 

KO is much more expensive than the typical stocks I acquire, but it seems to always be expensive because of the continual business growth. Also, with so many stocks being expensive today, I figured I should look at one that is perennially expensive.

 

[Guest wellmont]

i think the takeaway here is can a smallish investor do "better" than KO at 20 times earnings? my answer is Yes. provided he puts the time and effort into uncovering values. the other lesson that comes to mind is patience. how long did buffett follow KO before he pounced? how long did buffett follow ibm before he ponced? I don't think ko is "pounceworthy" at this price. having said that you can't go very far wrong buying ko. you could be buying crm instead. :)

[boilermaker75]

I searched, but somehow missed the KO thread.

 

Also obviously a senior moment as I have posted previously on this thread, LOL.

[boilermaker75]

i think the takeaway here is can a smallish investor do "better" than KO at 20 times earnings? my answer is Yes. provided he puts the time and effort into uncovering values. the other lesson that comes to mind is patience. how long did buffett follow KO before he pounced? how long did buffett follow ibm before he ponced? I don't think ko is "pounceworthy" at this price. having said that you can't go very far wrong buying ko. you could be buying crm instead. :)

 

Buffett purchased 257,640 shares of KO on August 8, 1994 at $21.95 per share. 1993 earnings were $0.84 and 1994 earnings were $0.98. So Buffett bought KO at a higher PE than KO's current PE.

 

I also have been selling puts on KO here because the at-the-money puts have pretty good premiums.

 

If the KO I acquire returns 15% I will be quite happy.

 

 

[Parsad]

I searched, but somehow missed the KO thread.

 

Also obviously a senior moment as I have posted previously on this thread, LOL.

 

LOL!  It happens.  Cheers!

[thecynic]

KO is much more expensive than the typical stocks I acquire, but it seems to always be expensive because of the continual business growth. Also, with so many stocks being expensive today, I figured I should look at one that is perennially expensive.

 

From a writeup linked by manual of ideas http://www.beyondproxy.com/invest-in-wide-moat-businesses/ :

 

Here is a quote from a Fortune article about investing in Coca-Cola, dated December 1938: “Several times every year a weighty and serious investor looks long and with a profound respect at Coca-Cola’s record but comes regretfully to the conclusion that he is looking too late.”

[Palantir]

Here is a quote from a Fortune article about investing in Coca-Cola, dated December 1938: “Several times every year a weighty and serious investor looks long and with a profound respect at Coca-Cola’s record but comes regretfully to the conclusion that he is looking too late.”

 

 

LMAO. Too good.

[fareastwarriors]

  Earlier I mentioned the financial results that could have been

achieved by investing $40 in The Coca-Cola Co. in 1919.  In 1938,

more than 50 years after the introduction of Coke, and long after

the drink was firmly established as an American icon, Fortune did

an excellent story on the company.  In the second paragraph the

writer reported:  "Several times every year a weighty and serious

investor looks long and with profound respect at Coca-Cola's

record, but comes regretfully to the conclusion that he is looking

too late.  The specters of saturation and competition rise before

him."

 

    Yes, competition there was in 1938 and in 1993 as well.  But

it's worth noting that in 1938 The Coca-Cola Co. sold 207 million

cases of soft drinks (if its gallonage then is converted into the

192-ounce cases used for measurement today) and in 1993 it sold

about 10.7 billion cases, a 50-fold increase in physical volume

from a company that in 1938 was already dominant in its very major

industry.  Nor was the party over in 1938 for an investor:  Though

the $40 invested in 1919 in one share had (with dividends

reinvested) turned into $3,277 by the end of 1938, a fresh $40 then

invested in Coca-Cola stock would have grown to $25,000 by yearend

1993.

 

    I can't resist one more quote from that 1938 Fortune story: 

"It would be hard to name any company comparable in size to Coca-

Cola and selling, as Coca-Cola does, an unchanged product that can

point to a ten-year record anything like Coca-Cola's."  In the 55

years that have since passed, Coke's product line has broadened

http://www.berkshirehathaway.com/letters/1993.html

[Hawks]

Anyone buying KO in this current price range of $38? Its forward PE is in the 16-17 range which is slightly below its historic average I believe. Yacktman has been  buying heavily in the 2nd quarter and that attracted my attention.

[boilermaker75]

Anyone buying KO in this current price range of $38? Its forward PE is in the 16-17 range which is slightly below its historic average I believe. Yacktman has been  buying heavily in the 2nd quarter and that attracted my attention.

 

I already own some KO, but I have written some 38-strike Sept 6 and Sept 21 puts. I would be fine getting put to and ending up with a basis of 38-option premium.

[fareastwarriors]

http://www.nytimes.com/2013/10/26/business/bottled-water-sales-rising-as-soda-ebbs.html?hp

 

Bottled Water Sales Rising as Soda Ebbs

[fareastwarriors]

Breaking:

 

Coca-Cola buys 10% stake in Green Mountain Coffee in $1.25 billion deal

[A_Hamilton]

Breaking:

 

Coca-Cola buys 10% stake in Green Mountain Coffee in $1.25 billion deal

 

GMCR up 40%. Einhorn's got to be feeling the heat at the moment.

[fareastwarriors]

http://www.bloomberg.com/news/2014-02-05/coca-cola-to-buy-10-stake-in-green-mountain.html

 

 

Coca-Cola is buying the 16.7 million newly issued shares for about $74.98 apiece, the companies said today in a statement. Green Mountain stock surged in late trading after being halted earlier.

[fareastwarriors]

 

Coca-Cola: glass less than half full

 

 

 

Drink maker may regret not scaling all of Green Mountain

 

 

 

 

 

 

 

 

Coca-Cola just wants a sip. On Wednesday it unveiled a 10-year partnership with Green Mountain Coffee Roasters to collaborate on a cold beverage device that will allow users to make single servings of Coke and other cold drinks at home. Green Mountain has experience here – it developed the hit Keurig single serve coffee and tea dispenser. Coke, despite its $165bn market value, will not buy Green Mountain outright for, say, $15bn, including a premium for full control. Rather it is dropping just $1.25bn for a 10 per cent stake. The soda pioneer is desperate for growth, particularly in mature markets. But spending outlandishly to chase pricey upstarts would sour an investor base that likes steady growth along with a solid dividend.

 

Coke wants to double its “system” revenue (itself and bottlers) between 2009 and 2020. Unfortunately North America is not going to help much. Sugary and diet drinks are shunned. Coke’s North American shipments were flat in the first nine months of 2013. Green Mountain, by contrast, has been one of the fastest, if more controversial, growth stories in beverages. Its revenues jumped 50 per cent annually between 2006 and 2013. Activist David Einhorn has challenged its books to little avail. Its shares have risen nearly 500 per cent in the past 18 months and on Thursday soared another third (short-covering is a factor here).

 

Coke bought its stake at the market price and has already clocked a paper gain of $400m. The simple partnership idea appears influenced by Pepsi’s rumoured dalliance with SodaStream last summer. Pepsi passed on acquiring all of the DIY fizzy drink machine maker. Since then, SodaStream’s growth has slowed and its share price has halved. But low risk deals can also be low reward. Should Green Mountain’s growth bubble over, Coke may wonder if it should have just chugged the entire can.

 

http://www.ft.com/intl/cms/s/3/982ff97c-8f57-11e3-be85-00144feab7de.html?siteedition=intl#axzz2sZxUUvKS

[rkbabang]

I agree Ko should have picked up all of Green Mountain.  People are going to move further and further from sugary drinks and those diet drink poisons, but coffee isn't going away any time soon. Diversifying into coffee would have been a great move.

 

 

http://finance.yahoo.com/news/sugar-tied-fatal-heart-woes-122230276.html

 

"obesity didn't explain the link between sugary diets and death. That link was found even in normal-weight people who ate lots of added sugar."

 

"Adults who got at least 25 percent of their calories from added sugar were almost three times more likely to die of heart problems than those who consumed the least - less than 10 percent."

 

[fareastwarriors]

Coke and Einhorn Take Opposite Sides of Green Mountain Bet

 

http://dealbook.nytimes.com/2014/02/07/coke-and-einhorn-take-opposite-sides-of-green-mountain-bet/?_php=true&_type=blogs&module=BlogPost-Title&version=Blog%20Main&contentCollection=Breakingviews&action=Click&pgtype=Blogs&region=Body&_r=0

[Guest deepValue]

I don't know why everyone talks about the U.S. CSD market when they talk about Coca-Cola. The real story is in international markets: http://www.coca-colacompany.com/annual-review/2012/pdf/2012-per-capita-consumption.pdf

 

Look at the top 15 countries by per capita consumption and try to find the common thread (spoiler: there is none). The world will drink more Coke in 20 years than it drinks today, even if the U.S. drinks less.