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Wall Street, financial arbiter in the capital of the world, has amassed dozens of adages since the dawn of publicly-traded companies. Adages that -- while not proving to be 100% accurate for every historical case study -- nevertheless do contain substantial amounts of truth. And one of Wall Street's adages is: "No one ever went broke, holding Coke."
That's The Coca-Cola Company (NYSE:KO), not the bottler. Coke's shares closed Friday at $48.24 up 14 cents.
Sluggish sales, as well as competition from generic colas, and the U.S.'s trend toward the consumption of health-oriented, non-carbonated sports drinks, like Gatorade, have created a substantially different soft drink sector than a generation ago, when KO was dominant both domestically and internationally.
And that sluggishness has been reflected in Coke's stock price, which, for the most part, has been stuck in a $40-$55 range for about 6 years.
Still, another way of looking at this is to argue that Coke's shares have held support in the $40-range, despite the onslaught of lower-cost competitors, new soft drink choices, a U.S. economic recession, and a geopolitical landscape that has a full plate of concerns, to say the least.
Perhaps a typical American investor's case would be more illustrative. An aunt, who with her husband raised three children in Connecticut, held your standard middle-class investments (not including her house): three or four mutual funds in a 401K plan, some bonds, a money market account. My aunt didn't follow the markets much and wasn't a stock picker, but when a colleague in 1973 advised her to buy Coke, she bought 500 shares.
In the decades that followed, her portfolio's performance more-or-less tracked the market's many ups and downs and changes, but she never sold Coke. And although she didn't attain yacht-buying status, during these years she never missed a mortgage payment, those three kids earned college degrees, and her family never went broke, holding Coke.
All of which suggests that maybe there's something to those Wall Street adages, after all.
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Reader Comments (Page 1 of 1)
2-05-2007 @ 8:27AM
Michael Schneider said...
Coca-Cola is againing market share in North America, They bought Odwalla and are making other inroads into alternative beverages. The stock is up from around 42 recently. It's a different situation than a few years ago and they have great opportunity to expand abroad.
Coca-Cola was covered in The Barrel View free e-mail newsletter at www.Barrelomoney.com. You can find a list of stocks there that have been mentioned in the letter and those interested can get future mailings by signing the Private Guestbook. Coke;s consistent and growng dividend is another reason to like the stock.
2-13-2007 @ 4:05PM
JA Dominski said...
Although this is true of your aunt's holdings in Coke during the time frame you mention; I have a family member who experienced quite the opposite while holding KO shares. A family member has held the stock for approximately the last ten years. Much to our surprise KO has performed negatively by a small amount - even when taking into account the dividend payout. We had determined this by analyzing the the share prices we had paid during the period along with the dividends reinvested. In which case all were reinvested in KO. KOs stall seems to have started after the death of one of their executives in the early 90s.
we are now looking at selling KO and moving to something a bit more diversified like Pepsi where they have a snack line to provide sales.
Unfortunately, until they get an exceptional leader back at the helm, I am starting to beleive that the stock will continue in it's stagnant state. Unfortuntely, in the last ten years KO has gone absolutely no where.