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Coca-Cola remains the real thing

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Coca-Cola is worth an evaluation.

This is not your parents' The Coca-Cola Company (NYSE: KO) company. This is the drink-diversified KO. Coca-Cola has adeptly positioned itself in the health (Vitamin Water) and sports drink (Powerade) segments, while continuing to effectively publicize one of the most iconic brands in the world, its namesake cola drink.

Other positives: KO has dominant or large-lead market share positions in key developed nations, an impressive emerging market presence, a superior balance sheet, and marketing skills that many companies can only dream about. The Reuters FY 2008/FY 2009 EPS consensus estimates for KO are $3.03 to $3.32.

In addition, buy some of Coca-Cola's shares and you're buying not only a consumer products giant, but also uniting yourself to a part of Wall Street history and lore -- one of Wall Street's famed, generations-old adages. And, as those in the Concrete Canyon will attest, it's always prudent for investors to heed Wall Street's adages. The adage regarding KO is "No one ever went broke holding Coke."

Long after the last collateralized debt obligation has been liquidated (no doubt at a substantial loss), Coca-Cola's shares will be paying handsome returns.

The risk? There is a long-term, secular trend away from carbonated drinks, hence despite KO's added non-carbonated brands, any further, sustained, substantial move by consumers, international or domestic, away from carbonation will hurt KO's revenue and earnings. But so long as many still find it o.k. to enjoy a cola drink, in moderation, KO's shareholders will benefit.

The First Call mean rating for KO is: Buy [16 firms]. Mean 2008 target: $66 [high: $73, low: $60].

Stock Analysis:
Coca-Cola is a low-risk stock. Investors with an investment horizon longer than 2 years should be rewarded from KO's shares. Sell/Stop Loss if you were to purchase shares in this company: $48.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.

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Last updated: July 24, 2008: 08:52 AM

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