My obsession with Coca-Cola, especially its stock

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If I had to admit to an obsession in the world of investing and stocks, it would be to one day be the part owner of The Coca-Cola Company, with the stock symbol I know better than any other, KO.

coke1

I have often talked on this site about what it means to be a Dividend Tycoon, and in the plainest language possible it is about being a tycoon, through ownership of amazing businesses, that pay dividends. Ownership of Coca-Cola stock is therefore a definite goal of this Dividend Tycoon, the sooner the better.

This article is not going to be an analysis of The Coca-Cola Company or the current valuation of the stock, because I think that information is easy to find and has been written about extensively elsewhere. I do not think it would serve a great purpose to regurgitate facts and figures about the company. All I will say is that it is the largest global non-alcoholic beverages company, operating in every country of the world bar North Korea and Cuba, has over 3500 brands (not just the traditional coke) of which 20 have annual revenues exceeding a billion dollars.

So what am I going to write about? I am going to write about why I have developed this obsession, how it came about, and how it sometimes makes even me think I am a bit strange..

  • It is tangible: When it comes to stocks I really think it helps as an investor if the stock is tangible to you. With Coca-Cola it is difficult to escape. It is in every grocery store, gas station, cinema, bar, even your own fridge sometimes. To me that makes it easier to stay invested in a stock.

Now the obsession bit. When I take a walk or a drive or whatever, I always notice people carrying their coke cans or bottles, sometimes even the bottles or cans lying discarded on the side of the road.. The Dividend Tycoon part of my brain cannot help thinking something along the lines of “Warren Buffett owns almost 10% of Coca-Cola, so he made a profit on that bottle lying there.” Sad, I know. I do though want this site to be honest and transparent, even if I end up looking strange.

  • The history: The Coca-Cola story is amazing. Again, the history has been written about extensively, but it amazes me that a small company based in Georgia, USA could grow first in the USA, then slowly making it’s way around the world, till practically the entire world is blanketed in the red and white logo.

Now the obsession bit. I love it when I watch an old movie, say from the 60’s or 70’s and you see the Coca-Cola logo displayed at some gas station or someplace in the middle of nowhere. I love the idea of thinking that it had already spread so far, yet in fact had so far still to go, and is still growing.

Also, I have read three books about the Coca-Cola company.

For God, Country, and Coca-Cola (Mark Pendergrast)

The Real Thing: Truth and Power at The Coca-Cola Company  (Constance L. Hays)

Inside Coca-Cola: A CEO’s Life Story of Building The World’s Most             Popular Brand (Neville Isdell)

I do not tire reading stories about the growth and the early small investors, the big investors, the challenges overcome.

  • The investment legends: I cannot write an article about Coca-Cola without mentioning the purchase in 1988 of a big chunk of Coca-Cola by Berkshire Hathaway, headed by Warren Buffett. To me this purchase defines Berkshire and Buffett. I know much is made of the insurance operations and other operating businesses owned by Berkshire Hathaway, but I truly believe that this purchase was the one that gave Warren Buffett the most joy. By all accounts he steeped himself in all things Coca-Cola shortly after this purchase, filling his office with Coca-Cola memento’s for example, and then joining the board of directors. When I read the biographies of Warren Buffett I pick up his joy in secretly acquiring his initial stake, buying huge chunks of KO stock before the market knew it was him buying.

Now the obsession bit. Warren Buffett is an example of a big investor, who understood the opportunity Coca-Cola presented, when the company was coming out of a rough patch, and against conventional wisdom heavily concentrated his investments in Coca-Cola. It is today a fairly small portion of Berkshire Hathaway’s assets, but in 1988 was substantial. However, it is with the smaller investors that my obsession takes root again. Here are a few examples I have read about:

The small town of Quincy: This town in Florida had a banker named Pat Munroe. When Coca-Cola had been around for decades already, around 1920, Pat Munroe could see the vast potential for expansion of the drink. He thus encouraged the residents of this small town to buy stock in Coca-Cola. Many took his advice, and despite the town suffering some severe economic downturns, many residents become millionaires on the back of their Coca-Cola stock. Apparently you can still see the Coca-Cola mansions dotted around the town.

See my post on Ann Scheiber, Coca-Cola was one of the stocks boosting her wealth to $22 million from an initial $5000 stake.

I love these stories, because they give me hope. Hope to find my own Coca-Cola. I believe I may have a few in my South African portfolio. I have written about a few of these hopefuls, and will write more in future. None have been life changing yet, but it is still my hope that some of these, or stocks still to be invested in, will in due course give me a story like these Coca-Cola investment legends.

  • The amazing figures:

Warren Buffett in fact gave a speech some time back where he said that had you invested $40 on one share of Coca-Cola when the stock went public in 1919, and reinvested the dividends it would be worth $5 million. It is now probably closer to $10 million, but I think you probably see the point..

Conclusion:

The Coca-Cola Company is perhaps going through a tough time at the moment. There are concerns about sugar and concerns about where it will still find growth. However, I took a walk around my local CBD yesterday, and in every fast food outlet I could see people sitting with their Coke or Fanta, and every corner store had the trademark Coke fridge in it. This business is not going away anytime soon, it will continue to pound out profit and dividends for decades. In fact it may just be the Coca-Cola story stock I am looking for..