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Coca-Cola Has Its Merits, But The Upside Is Limited

May 26, 2023 6:42 PM ETThe Coca-Cola Company (KO)PEP7 Comments
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Atlas Equity Research


  • The Coca-Cola Company has been the go-to example for recession resilience and business stability.
  • In recessions, Coca-Cola traditionally has done better than the general market and its main competitor - PepsiCo.
  • However, looking at the current market value, Coca-Cola is trading well above its 20-year average EV/EBITDA multiple, and its cash flow yield is much lower than the Fed’s funds.
  • In longer time frames, The Coca-Cola Company has been underperforming both the market and its biggest competitor - PepsiCo.

Coca Cola bottling company in Hungary

Zoltan Tarlacz/iStock Editorial via Getty Images

When thinking about recession resilience, one of the first company that comes to mind for many investors is The Coca-Cola Company (NYSE:KO). The beverages produced by the company have been proving themselves

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Atlas Equity Research profile picture
Focused on value plays, preferably with a near term catalyst and/or improving market conditions. My approach is grounded on the fundamentals of the business, emphasizing its ability to generate cash and withstand unfavorable economic environment.   * Associated with Insight Analytics

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

Excellent data and commentary.
I am a long-term shareholder both of KO and of PEP, though I bought more PEP because I preferred its business mix, and still do. My cost basis on PEP is about $ 12.61, and it is my largest position. My cost basis on KO is about $ 11.39. So PEP has vastly out-performed KO over this long time period.

I do not regret having a position in KO, which is a safe investment, and offers diversification to my portfolio. In BRK Warren Buffett famously holds a large position in KO, apparently his oldest, and one which he has said he will never sell. So far as I know, he has never held any PEP, though I'm not sure why. Though in law there would be no conflict of interest in his holding both, perhaps he would consider it unseemly to be a well-known booster of KO while holding its leading competitor.
@Sugar Charlie congrats on two awesome winners for you! That's a lot of dividends collected!
@Valuestocks007 Most kind. Buy-and-hold strategy, with high-quality names which you reasonably expect you may be able to hold indefinitely. Sell only if you believe you see fundamental deterioration not likely to be remedied, or if you are confident you can buy something fundamentally better with the proceeds of disposition net of tax. (And the larger your unrealized gain, the harder that becomes.) Avoid market-timing. I held on after "Black Monday" in October, 1987, because I saw no basis for the sharp pullback. Equities soon recovered, and I have followed that valuable lesson since then (dot.com bubble burst; "9/11" 2001 and recessionary years following; 2008-09; spring 2020). -- Good luck.
@Sugar Charlie I have the exact same thoughts.. I own 4 stocks for over 20 years and the rest for 10-15.. a few new ones I add on occasion but not often!
needs to focus on business. Woke does not work. They should focus on their customers. And perhaps apologize for their helping MLB move the all star game from Atlanta
Thanks for your piece it makes sense.. One thing for me personally buying stocks over the last 30 years.. I just felt like I am not smart enough to know when a stock is cheap or expensive.. thus I just keep buying , dripping on a regular basis.. I get a few more shares when its "cheap" and a few less shares when its "expensive" KO is in that category for me.. I just buy it and drip it. New holding for me started in 2021.. after watching it for 20 years! Wish I had owned it that whole time!
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