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Andrew Heyl
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Education: BA Economics; JD Law Experience: I have been studying economics and public companies for more than 20 years. Value Investor. Disclosure: My articles and comments are solely my opinion, not an investment recommendation or solicitation, and may not represent the views of my... More
  • Thoughts On Coca-Cola 0 comments
    Jun 16, 2013 7:35 AM | about stocks: KO

    All human beings love Coke. Although I have known this fact from my earliest recollections (my mother drank Coke for breakfast until her death at 91), I somehow managed not to own a share of stock of Coca-Cola (NYSE:KO) until recently. There was the New Coke debacle in the 80's that put me off owning shares for a number of years (a lost opportunity), and then there was always the thought that it was overpriced for a value stock. More recently I was worried about the effects of a Sugar War that was started by health conscious Americans against fast food and sugary sodas in their quest to end obesity. Coca-Cola is high on their hit list and a lightning rod for their wrath.

    The Sugar War reached its zenith last summer when New York City Mayor Michael Bloomberg imposed a ban on soda drinks of more than 16 ounces. A group of New York sugar addicts rebelled and formed the "Million Big Gulp March" (in reality a few dozen), who protested in front of City Hall. When late night comedians took up the fight in favor of the sugar people, the writing was on the wall. President Johnson said "If I've lost Cronkite, I've lost Middle America." In current jargon, when you lose Jon Stewart and Bill Maher, forgetaboutit.

    Soon after the ban, litigation was started and New York Judge Milton Tingling declared the law unconstitutional, finding that the ban was "arbitrary and capricious", and also that the mayor should have gotten a vote by the city council. The case is now under appeal. It does not matter how the appellate court eventually rules, the war has already been lost. Coca-Cola has won again. I should have bought shares at that time, but didn't. I waited until after I saw a program on Bloomberg television in which newswoman Trish Regan was on a whale watching trip with Sir Richard Branson. Yes, this is the same Sir Richard Branson who founded Virgin Records (his first multi-million dollar business), when he was a teenager. As Richard and Trish were lounging on Richard's whale watching yacht, after swimming with the leviathans, Trish popped the big question and asked Richard what his biggest business failure had been. Without hesitation Richard responded that it was Virgin Cola and readily admitted that he had underestimated the power of Coca-Cola, and that Virgin Cola didn't have a chance competing against it. At that point I decided to buy Coca-Cola.

    Seeking Alpha contributor, Prasad Capital Management, recently published an excellent article about Coca-Cola;

    http://seekingalpha.com/article/1490492-coca-cola-opportunity-of-a-generation

    The article used a number of relevant metrics to show that Coca-Cola's stock is currently cheap by historical standards (it also mentioned that Warren Buffet bought Coca-Cola at a PE of 20). Coca-Cola is of course an iconic brand and -- regardless of whether it is overpriced or underpriced -- it will continue to grow. The growth will primarily be in the emerging and frontier markets, since Coca-Cola has pretty much saturated the developed world. Muhtar Kent, chairman and chief executive officer of Coca-Cola, is the perfect person to lead the company in this growth. Kent started with the company in 1978 and has spent most of his life working in the area where Asia, Africa and Europe join. Asia, Africa and Europe form the largest land mass in the world with a huge population. It is also where you find emerging and frontier markets. The land mass and its population dwarfs the Americas. Kent knows this area well, and it is no coincidence that he has been chosen to lead Coca-Cola.

    On June 4, 2013 Coca-Cola put out a press release that it was investing $200 million dollars in a bottling plant in Myanmar. If health conscious Americans, Mayor Bloomberg, and Sir Richard Branson can't beat Coca-Cola, 60 million Burmese don't have a chance. It you haven't already done so, quit fighting it and buy Coca-Cola. I bought on March 13th. I'm up 4.3%.

    Disclosure: I am long KO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Themes: long-ideas Stocks: KO
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