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The Straits Times
Oct 23, 2011
Coke sizzles despite fizzling US economy

Atlanta - In good times or bad, each of the planet's nearly seven billion people downs about seven non-alcoholic drinks every day.

That largely accounts for the fact that shares of the world's biggest beverage company - and most powerful brand - did not go flat as the rest of the market did when the United States economic recovery fizzled.

A CNN report showed that shares of Coca-Cola returned 4 per cent this year through Oct 17, against a loss of 2.9 per cent for the S&P 500, partly on the strength of Coke's overseas profits.

Coke is already the biggest provider of non-alcoholic drinks, as its sodas, juices and speciality drinks fill up 1.7 billion cups daily. Bullish investors point out that sales are growing fastest in the emerging markets.

Revenues in Asia, Latin America and the Pacific have all soared by double digits in the first half of the year. And Coke plans to invest US$4 billion (S$5 billion) in new plants in China by 2014, according to CNN.

Foreign opportunities are why Mr George Fraise has made Coke a top holding in his John Hancock US Global Leaders Growth.

'Coke has the best distribution network in the world,' he says.

Because of health and economic concerns, Americans have begun to kick the cola habit. Though fizzy drinks are still on the rise globally, US carbonated-soda sales have fallen 8 per cent since their peak in 2006, CNN reported.

The fear is that foreign markets may eventually follow the US lead. Mexico, long one of Coke's best markets, has started to discourage the sale of sodas in schools. And France has proposed a new tax on sugary drinks.

As an alternative, Coke has bought or started dozens of healthier lines, such as Minute Maid juices and Dasani water.

Many of those products, though, have lower profit margins, says Mr Gary Hemphill, senior vice-president of Beverage Marketing Corp.

Coke cemented its reputation as a defensive stock in the financial crisis when its shares lost less than the S&P 500.

And since 2008, the stock has risen nearly twice as much as the broad market - even returning 6 per cent during the summer slide, while rival Pepsi lost nearly 11 per cent.
My Value Investing Blog:
Today's edition of Sunday Times also contained an advice from Julius Baer "The Poorer you get in the West, the more Mac's you eat. And the richer you get in emerging markets, the more Mac's you eat." Mac and Coke...interesting companies.
Just some thoughts... some of our locally listed companies are market leaders in their own right and are decently profitable. However, many of our locally listed firms do not yet have and may not ever achieve the global reach, franchises and earning power of the large US corporations which includes the likes of KO, MCD, Cl, PG, etc. Some of their products include everyday inevitables like Colgate toothpaste (CL), Gillette shavers (PG), etc. It would be good to look at their global market share, their ROE, gross profit margins, net profit margins and other key ratios. Of course, one has to content with the declining USD.

Disclaimer: not an invitation to buy or sell the above counters. Do your own due dilligence.
Good news for shareowners. KO has just declared a dividend of 51cents/share. That's an 8.5% increase from last quarter!
KO's recent result announcement gives further evidence that the business is thriving and alive and poised for further growth. Volume growth in India and China was 20% and 9% respectively. Even in troubled Spain and Italy, brand Coca Cola grew 3% and 5% respectively. Commendably, brand Coca Cola volume grew 20% and 27% in Russia and India respectively. Very respectable numbers in volume growth indeed.

On top of that, the BOD has recommended a 2 for 1 stock split yesterday. Indeed an investment in KO has been rewarding to shareowners who believe in the enduring nature of the underlying business and are willing to hold on to their investment and allow the buisness to evolve and grow.
Coca-cola moving real fast... Tongue

Coca-Cola to begin first local production in Myanmar in decades

YANGON - The Coca-Cola Co said on Tuesday it will begin production in Myanmar as part of a planned US$200 million (S$250 million) investment in the Asian country.

The new facility is the first to locally bottle Coca-Cola in more than six decades and follows the US company’s re-entry into Myanmar last year.
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
KO coming nearer down to 52w low
Looks like 37 is a nice level to buy and hold a uber big, boring and steady company.

Recent fell due partly to exposure to EM markets

Current price 37.10

Put option expiring 22 Feb
34.00 0.01 0.00 - 0.01 - 2951
34.50 - - - 0.02 - 0
35.00 0.02 0.00 - 0.01 - 4582
35.50 - - - 0.01 - 0
36.00 0.01 0.00 0.01 0.02 2 4779
36.50 0.04 +0.02 0.02 0.04 10 355
37.00 0.15 +0.06 0.13 0.15 1172 8190
37.50 0.49 +0.20 0.44 0.47 484 3939
38.00 0.88 +0.30 0.89 0.96 1016 15441
In the money

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Interesting article. If according to this blogger, his price would likely be near $37

I like the US market, because the bulls and bears are so big, that i find manipulation quite difficult unlike our mickey mouse market.


Friday, January 24, 2014
Coca-Cola: A wide-moat dividend growth stock to buy and hold

In the past month, I purchased several hours of freedom, by adding to my position in the Coca-Cola Company (KO). I believe that Coca-Cola is a core holding for long-term dividend investors. This one time effort of investing in Coca-Cola will result in a lifetime of dividend payments which increase annually above rate of inflation. I like situations where most of the work is in the initial set-up, after which I receive cash in the mail every 90 days, for many decades to come.

I view buying shares in quality businesses such as Coca-Cola similar to purchasing time. For example, if you are an average person earning $20/hour, and you purchase 100 shares of Coca-Cola that generate $102 in annual dividend income, you essentially purchased 5 hours of time per year. That is five hours per year you will never have to spend working again. It gets even better - your dividend income raises will likely be much better than inflation and salary increases.

Everyone knows about what Coca-Cola does. Not everyone knows that this dividend king has managed to reward shareholders with higher dividends for 51 years in a row. It is one of only 17 companies in the US that has ever done it. Over the past decade the company has managed to raise distributions by 9.80%/year. In comparison, earnings per share have increase by 12.30%/year. The company has managed to reduce the amount of shares outstanding from 4.924 billion in 2003 to 4.498 billion in 2013, through regular share buybacks.

One of the largest investors in Coca-Cola is Warren Buffett’s Berkshire Hathaway (BRK.B). Coca-Cola fit the four filter criterion that Buffett and his partner Charlie Munger look for in a quality businesses, when they initiated their stake between 1988 – 1993. The four filters include:

1) Understandable quality businesses
2) Sustainable Competitive Advantages
3) Able and Trustworthy Managers
4) Margin of Safety in Valuation

Coca-Cola is a business that is not too difficult to understand. The company essentially sells drinks to consumers, and has a distribution network that allows it to reach consumers in as far out places as possible. The company sells several hundred brands of carbonated and non-carbonated drinks, to the tune of 1.8 billion servings/day. Coca-Cola sells high margin syrup concentrate to independent or partially owned bottling plants throughout the world, who then distribute it in their respective areas. Coca-Cola has significant bottling interests in the US, after acquiring operations from Coca Cola Enterprises (CCE) in 2010.

The competitive advantages of Coca-Cola include strong brands, and a distribution network that spans across the globe. For example, consumers who like Coca-Cola the drink, are going to keep drinking Coca-Cola and not drink PepsiCo (PEP) or put a generic brand Cola in their mouths. Coca-Cola also spends a lot of money on advertising, in order to create a positive association with the brand and strengthen the company’s image. The consumer loyalty also results in some pricing power, which should bode well for profits in the long-run. It would take a competitor a lot of money to take away the business of a company like Coca-Cola. In order to create the same type of brand loyalty, and distribution system, one not only needs a lot of money, but also a lot of time to earn customer trust. Therefore, I would say there are high barriers to entry. People would always need refreshments, which is why I think that Coca-Cola products would still be relevant to consumers 20 – 30 years from now.

I believe that Coca-Cola has able and trustworthy managers. It has a history of constantly executing its strategy in an otherwise very competitive food and beverage industry. Management has been able to diversify product line away from carbonated soft drinks and into things like waters, juices, etc. In addition, management is not focused on empire building for the sake of empire building, but seems to be intelligently allocating capital. They have done some diworsification deals in the past, such as the acquisition of Columbia Pictures in 1982, which was promptly sold a few years later, but by and large they have avoided the stupidity that other corporate managers have succumbed to. I like the fact that management is committed to paying and raising dividends to loyal long-term shareholders. I also like the fact that the shareholder friendly management is buying out weak hands, through consistent share buybacks. This makes each share that I own more valuable over time, particularly because net income and revenues are also growing.

In addition, I would think that the firm would sell for more than what it is selling for to a private buyer. In his analysis of Coca-Cola, Charlie Munger estimated a future value of $2 trillion for the company by 2034. When Buffett bought in 1988, he estimated that the value for a private business owner was twice the price he paid. Based on my understanding of global trends, consumption of Coca-Cola products will increase over time, as it is riding the wave of prosperity around the world. There are going to be hundreds of millions of people that will be lifted out of poverty over the next 20 years, and they would all want to engage in the same type of consumerism that most citizens of developed countries enjoy today. The level of consumption in places like China, India and Russia is much lower than that of places like US, which could translate into growth in volumes for a very long time. In fact, my conservative estimate for earnings growth is 7%/year for the next 20 years. If you add in 3% dividend yield, I would say that Coca-Cola can easily generate total returns of 10% for the next 2 decades. This of course is not a slam dunk, but I think this is a very likely scenario. A more bullish scenario would be for earnings per share to grow by 10%/year, using a 7%-8% net income growth, and 2- 3% in growth from share buybacks.

Currently, the stock is at the high end of my buy range, as it trades at 20 times estimated 2013 earnings. I managed to make my latest investment at an effective price of $38.20, because I had sold January 2014 puts at a strike 40 a few months ago. The puts were assigned over the weekend. I also have January 2015 puts with the same strike, which I hope to get exercised as well. I did purchase some stock over the past 5- 6 years when prices and valuations were lower, but I focused more on PepsiCo (PEP). Now I am working my way on building out my Coke position also. Everyone knows Coca-Cola is a quality company, which is why it demands a premium price.

After all, would you rather buy a business that is likely to deliver 7-10% dividend growth for the next 20 years at 20 times earnings, or would you rather buy a business at 10 -15 times earnings, which has the potential of dividend cuts during one of the next recessions?

Full Disclosure: Long KO, PEP and BRK.B
I like Drizzit's postings and his faithful post of Consuelo Mack interviews with value investors/managers.

In this dated post is Donald Yacktman who elaborated why KO.

and his one investment at 23:38mins

Kudos to Drizzit!

Video in link below

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The Coca-Cola Company declares $0.305 dividend
Thursday, February 20, 11:11 AM ET | KO

The Coca-Cola Company (KO) declares $0.305/share quarterly dividend, 8.9% increase from prior dividend of $0.28.
Forward yield 3.27%

Payable April 1; for shareholders of record March 14; ex-div March 12.

The Coca-Cola Company (KO) has just announced yet another dividend increase.
Iits 52nd consecutive increase.
If that is not amazing enough, the company is still sticking with the same schedule:
announcing the dividend increase the third Thursday of February each year.

Pardon my cut n paste. Portions of articles from SeekingAlpha

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