Consider Cola-Cola: Because no one ever went broke holding Coke

Posted Jul 15th 2009 4:20PM by Joseph Lazzaro
Filed under: Coca-Cola (KO), Stocks to Buy

Coke remains the real thing. I'm Reiterating my Buy rating for Cola-Cola (NYSE: KO), first recommended on February 20, 2009 at a price of $42.68.

Look for Cola-Cola to continue to register good-sized revenue increases in non-carbonated drinks, as the company broadens its distribution of the drink type. Meanwhile, KO's long-term growth targets, while not conservative, are still plausible: they're not likely to scare away institutional investors, and that big institution backing should further supporting KO's shares. The FY2009/FY2010 EPS estimates for KO are $3.06 to $3.34.

In addition, international market sales are expected to more than offset U.S. market declines of the namesake carbonated drink, but that's expected: the U.S. has 5,000 soft drink options, so some fragmentation is assumed, annually.

Finally, if you missed the $42 entry point, five demerits! Seriously, KO's chart is strong, technically, and has recently probed key $50 resistance, another bullish sign.

Stock Analysis: Cola-Cola is a moderate-risk stock. If you've already purchased KO's shares, hold them. If not, consider buying a 25% position in KO now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. More-cautious investors may wish until KO closes for three straight days above $50. Under any circumstance, don't buy more than 50% of your KO position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $27.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

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