Coca-Cola: no one ever went broke, holding Coke


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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Last updated: February 13, 2012: 04:30 AM

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