KO - Coca Cola (Safe and Sound Investment)
Current Price: 46,12$
Open: 45,99$
Stop Loss: 0,09$
Take Profit: 142,38$
S/L and T/P are basically set to avoid machine trading!
Leverage: X1
Capital Investment: 17,42% of Etoro capital or 0,8% of total capital
Dividend: 0,37$ per Quarter, 1,48$ per Year (3,2% dividend yield on invested capital)
Coca Cola Is A Safe Investment For The Next Crisis
As I think that the next financial crisis will come (we are jumping from crisis to crisis) I searched for a safe value Investment of companies which were not affected largely by the financial crisis. I found Coca Cola and analysed the chart of this company.
In January 2008 Coca Cola peaked at a share price of about 30,58$ per share. In February 2009 the lowest watermark of this share price was 22$. So your stock assets were at 72% of the value of 2008 before the crisis. This is a decline of 28% and the company quickly recovered the following years. At the same time the S & P 500 peaked on 12th of October 2007 at 1561,80$ and had a low on 6th of March 2009 at 683,38$ to about 43,7% of its value in 2007. That is a decline of about 56%. If you look at the the Dow Jones Industrial index for the same period it was at a Peak value of 14093,08$ on 12th of October 2007 and at a low of 6626,94$ on 6th of March 2009 at 6626,94$ which is 47% of its value in 2007 or a decline of about 53%. From these numbers you can clearly see that Coca Cola is a safe and sound investment for the long run if you do not use leverage on this stock. In addition you can cover the inflation rate with a yearly dividend yield of 3,2% for your invested capital. Etoro pays you the dividend for your CFD Investments although you do not directly own the stock.
However the price to book ratio of Coca Cola is quite high at the moment. Therefore according to Graham's value strategy this stock has no margin of safety at the moment. I consider to sell Coca Cola when it reaches price / book ratios of PepsiCo at around 12.
Next Quarterly Financial Report On October 25 of 2017
Out of the last 4 quarters Coca Cola's earnings per share were 3x better than the market consensus. We expect no big surprises by Coca Cola from the next earnings report, it is basically business as usual.
You can find the earnings surprises of Coca Cola on the following web page:
http://www.nasdaq.com/symbol/ko/earnings-surprise
EPS - Forecast
In the next picture you can find the market Consensus for the earnings forecast of the coming years of Coca Cola. The rising EPS could result in a slow but steady share price improvement over the years if there is no crisis as discussed earlier. In case of a crisis this stock / CFD can be used to dollar cost average buy shares on a monthly basis without leverage.
You can find the earnings forecast on the following web page:
http://www.nasdaq.com/symbol/ko/earnings-forecast
Comparison To PepsiCo And Price To Book Value
However if we look at the PepsiCo price to book value chart we can clearly see that Coca Cola seems to be still cheaper to get at current stock market prices.
See: https://ycharts.com/companies/KO/price_to_book_value
See: https://ycharts.com/companies/PEP/price_to_book_value
See: http://www.nasdaq.com/symbol/pep/pe-growth-rates
Coca Cola on the other hand has a stable business but does not grow that much. Keep in mind that we complain on a very high level here when it comes to earnings of Coca Cola.
See: http://www.nasdaq.com/symbol/ko/pe-growth-rates
If you calculate with current stock prices a growth in earnings of 7% you get the price / earnings forecast of PepsiCo. Calculated with 4,84% you get the estimated P/E ratios of Coca Cola. So much to the explanation of these pictures. As a value investor I personally prefer the company that is cheaper to buy into the book value which is clearly Coca Cola. Coca Cola recently made great progress in their research for sugar low / free products with Coca Cola Life. I expect some earnings growth with these new products and if they truly find better sugar substitutes then growth rates will become much higher which should transfer into higher stock prices.
Cash and Dept
Coca Cola is also the clear winner when you look at cash vs. dept figures of their financials.
You can find a cash / dept overview in the following article:
https://www.fool.com/investing/2017/09/13/better-buy-the-coca-cola-co-vs-pepsico-inc.aspx
You might want to check out this source article of Brian Stoffel from 13th of September 2017 at Mootley Fool. The clear winner for Brian Stoffel in his analyses is also Coca Cola but he has different additional arguments for both companies.
Due Diligence About Ownership
I also checked the ownership of Coca Cola. Coca Cola owners are large financial institutions (65% institutional ownership) and the biggest owner is Berkshire Hathaways. To me that is a good sign as Berkshire Hathaways invests in a style similar to my own.
See: http://www.nasdaq.com/de/symbol/ko/ownership-summary
Balance Sheet Analyses
Quick Ratio: 1,30
Current Ratio: 1,40
ROE: 17,70%
Equity Ratio: 24,40% (equity ratio is improving)
P/B Ratio: 9
P/E Ratio: 48,7
Coca Cola's refranchising efforts result currently in a drag on earnings but refranchising efforts should be finished with the end of the year 2017. Coca Cola sells of its bottling businesses and transforms to a brand innovator. However they keep their core business as they still produce the concentrates on their own. This transformation is mainly the reason why P/B and P/E ratios are higher than before. P/E ratios should become normal in 2018 when the drag on earnings ends.
(See: https://www.fool.com/investing/2017/08/24/coca-colas-refranchising-effort-shows-early-signs.aspx)
A Final Word In Regards Of Risks Involved
If you are new on this blog please read through the introduction (the big picture) before following my strategy and advises. You can find this introduction here.
Conclusion
Together with Philip Morris International (cigarettes market) this stock trade is my safe Investment for the bigger part of my portfolio. Coca Cola researches on sugar free and sugar substituted products to ensure they have products in their product portfolio the big masses will continue to buy in the future. Check out my analyses on Philip Morris International as well. The Investment idea is basically the same to search for a sound and safe investment in times of overheated markets. Stop Loss and Take Profit ratios are set to prices way above and below rational market prices to avoid machine selling of the trade at all costs since daytrading or machine selling and repurchasing activities could easily send your investment to a loss Investment because of the spreads. A comparison to PepsiCo shows that Coca Cola is currently the company that is cheaper to get from a price / book value standpoint which is partly because of lower earnings growth and estimated earnings growth.
Open: 45,99$
Stop Loss: 0,09$
Take Profit: 142,38$
S/L and T/P are basically set to avoid machine trading!
Leverage: X1
Capital Investment: 17,42% of Etoro capital or 0,8% of total capital
Dividend: 0,37$ per Quarter, 1,48$ per Year (3,2% dividend yield on invested capital)
Coca Cola Is A Safe Investment For The Next Crisis
As I think that the next financial crisis will come (we are jumping from crisis to crisis) I searched for a safe value Investment of companies which were not affected largely by the financial crisis. I found Coca Cola and analysed the chart of this company.
In January 2008 Coca Cola peaked at a share price of about 30,58$ per share. In February 2009 the lowest watermark of this share price was 22$. So your stock assets were at 72% of the value of 2008 before the crisis. This is a decline of 28% and the company quickly recovered the following years. At the same time the S & P 500 peaked on 12th of October 2007 at 1561,80$ and had a low on 6th of March 2009 at 683,38$ to about 43,7% of its value in 2007. That is a decline of about 56%. If you look at the the Dow Jones Industrial index for the same period it was at a Peak value of 14093,08$ on 12th of October 2007 and at a low of 6626,94$ on 6th of March 2009 at 6626,94$ which is 47% of its value in 2007 or a decline of about 53%. From these numbers you can clearly see that Coca Cola is a safe and sound investment for the long run if you do not use leverage on this stock. In addition you can cover the inflation rate with a yearly dividend yield of 3,2% for your invested capital. Etoro pays you the dividend for your CFD Investments although you do not directly own the stock.
However the price to book ratio of Coca Cola is quite high at the moment. Therefore according to Graham's value strategy this stock has no margin of safety at the moment. I consider to sell Coca Cola when it reaches price / book ratios of PepsiCo at around 12.
Next Quarterly Financial Report On October 25 of 2017
Out of the last 4 quarters Coca Cola's earnings per share were 3x better than the market consensus. We expect no big surprises by Coca Cola from the next earnings report, it is basically business as usual.
http://www.nasdaq.com/symbol/ko/earnings-surprise
EPS - Forecast
In the next picture you can find the market Consensus for the earnings forecast of the coming years of Coca Cola. The rising EPS could result in a slow but steady share price improvement over the years if there is no crisis as discussed earlier. In case of a crisis this stock / CFD can be used to dollar cost average buy shares on a monthly basis without leverage.
http://www.nasdaq.com/symbol/ko/earnings-forecast
Comparison To PepsiCo And Price To Book Value
When we look at the price to book value chart of Coca Cola we basically see the same picture of overheated markets as everywhere. The price you pay for the book value nearly doubled compared to 2013. That is mainly the reason why I am only invested with 57% of my total capital in the stock markets at the moment. I know that in the next crisis you can get such great companies like Coca Cola for nearly half the price even when their business is not affected by the crisis. This is because stock markets are also emotion driven by a large extend and I want to be able to buy into the stock markets with additional money again like in 2009 when the markets are in panic mode.
However if we look at the PepsiCo price to book value chart we can clearly see that Coca Cola seems to be still cheaper to get at current stock market prices.
See: https://ycharts.com/companies/KO/price_to_book_value
See: https://ycharts.com/companies/PEP/price_to_book_value
We compare the two companies on the price to earnings ratio and we can see that although the book value of Coca Cola is cheaper to get they basically do the same earnings for the price you pay. Here you can see the price / earnings ratio estimates of PepsiCo.
See: http://www.nasdaq.com/symbol/pep/pe-ratio
And in the next picture I show you the price / earnings ratio and estimates of Coca Cola in comparison.
See: http://www.nasdaq.com/symbol/ko/pe-ratio
If you wonder why the price / earnings ratio of PepsiCo is estimated to go down we can take a look at P/E and growth rates. This is how estimates look like for PepsiCo. You can see that PepsiCo has growth rates of 7,71% for the year 2017.
And in the next picture I show you the price / earnings ratio and estimates of Coca Cola in comparison.
If you wonder why the price / earnings ratio of PepsiCo is estimated to go down we can take a look at P/E and growth rates. This is how estimates look like for PepsiCo. You can see that PepsiCo has growth rates of 7,71% for the year 2017.
Coca Cola on the other hand has a stable business but does not grow that much. Keep in mind that we complain on a very high level here when it comes to earnings of Coca Cola.
If you calculate with current stock prices a growth in earnings of 7% you get the price / earnings forecast of PepsiCo. Calculated with 4,84% you get the estimated P/E ratios of Coca Cola. So much to the explanation of these pictures. As a value investor I personally prefer the company that is cheaper to buy into the book value which is clearly Coca Cola. Coca Cola recently made great progress in their research for sugar low / free products with Coca Cola Life. I expect some earnings growth with these new products and if they truly find better sugar substitutes then growth rates will become much higher which should transfer into higher stock prices.
Cash and Dept
Coca Cola is also the clear winner when you look at cash vs. dept figures of their financials.
https://www.fool.com/investing/2017/09/13/better-buy-the-coca-cola-co-vs-pepsico-inc.aspx
You might want to check out this source article of Brian Stoffel from 13th of September 2017 at Mootley Fool. The clear winner for Brian Stoffel in his analyses is also Coca Cola but he has different additional arguments for both companies.
Due Diligence About Ownership
I also checked the ownership of Coca Cola. Coca Cola owners are large financial institutions (65% institutional ownership) and the biggest owner is Berkshire Hathaways. To me that is a good sign as Berkshire Hathaways invests in a style similar to my own.
See: http://www.nasdaq.com/de/symbol/ko/ownership-summary
Balance Sheet Analyses
Quick Ratio: 1,30
Current Ratio: 1,40
ROE: 17,70%
Equity Ratio: 24,40% (equity ratio is improving)
P/B Ratio: 9
P/E Ratio: 48,7
Coca Cola's refranchising efforts result currently in a drag on earnings but refranchising efforts should be finished with the end of the year 2017. Coca Cola sells of its bottling businesses and transforms to a brand innovator. However they keep their core business as they still produce the concentrates on their own. This transformation is mainly the reason why P/B and P/E ratios are higher than before. P/E ratios should become normal in 2018 when the drag on earnings ends.
(See: https://www.fool.com/investing/2017/08/24/coca-colas-refranchising-effort-shows-early-signs.aspx)
A Final Word In Regards Of Risks Involved
If you are new on this blog please read through the introduction (the big picture) before following my strategy and advises. You can find this introduction here.
Conclusion
Together with Philip Morris International (cigarettes market) this stock trade is my safe Investment for the bigger part of my portfolio. Coca Cola researches on sugar free and sugar substituted products to ensure they have products in their product portfolio the big masses will continue to buy in the future. Check out my analyses on Philip Morris International as well. The Investment idea is basically the same to search for a sound and safe investment in times of overheated markets. Stop Loss and Take Profit ratios are set to prices way above and below rational market prices to avoid machine selling of the trade at all costs since daytrading or machine selling and repurchasing activities could easily send your investment to a loss Investment because of the spreads. A comparison to PepsiCo shows that Coca Cola is currently the company that is cheaper to get from a price / book value standpoint which is partly because of lower earnings growth and estimated earnings growth.
Kommentare
Kommentar veröffentlichen