If you entered or finished puberty before1983, you were probably a U2 fan for at least an album or two. Fans of a band will always argue incessantly about which record was the best. The somewhat pretentious The Joshua Tree snagged the album of the year Grammy in 1988 and How To Dismantle An Atomic Bomb took home a Radio Flyer wagon full of hardware including album of the year in 2006. The consensus here at Yieldpig is that 1993’s Achtung Baby is probably their finest mature album (we can talk about Boy, October, and War another time). The record garnered the band a best rock group Grammy, threw off a slew of hits, went platinum eight times over and is considered one of the best rock albums ever. Still, no best album Grammy. Funny that. Even with a song as cool as “Even Better Than The Real Thing”. The album was rough around the edges, dark, moody, risky, and experimental. Which got us thinking about the other “real thing”: Coca Cola (NYSE:KO).
According to our editor-in-chief, KO has been touted as THE must have equity in a portfolio for the better part of 15 years. Everyone loves it. Warren Buffet owns a buttload. The story is the same as it was 15 years ago: number one brand globally, international, especially emerging markets will drive growth and so forth. KO is a regular member of the Standard and Poor’s Dividend Aristocrats list having increased its dividend every year over the last 47 years. S&P currently rates the stock a five star strong buy. What’s not to like? If you purchased $10,000 worth of KO in January of 1995, it has pretty much tripled having turned in an average annual return of 7.39% which includes reinvesting dividends. Not bad. Call us iconoclasts or unrealistic, but where’s the fizz? After the run up from ’95 to ’99 (26ish to 59ish), the stock is basically where it was 10 years ago on a price basis. And this is during the explosion of the emerging markets during which the economies of Brazil, India, and China became real global market players. Is it truly the real thing? What if you’d had made an Achtung Baby investment and purchased $10,000 worth of money manager Alliance Capital’s (now Alliance Bernstein, symbol AB) MLP units?
Your $10,000 investment grew to $81,059, although at the market top of 2007 it was worth $191,090 …ouch…and returned 14.96% annually with dividends and distributions reinvested. Alliance is a top flight manager. They may not be in every refrigerator but they probably affect your everyday life more than you think through 401(k)’s, pensions, and other institutions that require their expertise. 20% of KO’s total return came from dividends versus 84% for AB. That’s eight times platinum. We’re not hating on Coke. If you bought it, you did great. But we think you can do better. There’s no rule saying you have to follow everyone. Dig. Don’t fear edgy, adventurous, or experimental. More often than not it pays off.
Disclosure: No Positions