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  • canucanoe1 canucanoe1 Apr 7, 2011 5:25 PM Flag

    Ok Canoe...tell me about $80


    Yes, KO is rising as is the market. But its multiple is compressing, as you noted.

    KO is a fat, bureaucratic company selling a commodity with a management team that is hugely overpaid. In fact, KO breaks most of Buffett's rules for investment selection now.

    Is this the type of company you want for a long term buy? It has missed most every beverage growth market of the past 15 years. It failed to diversify into symbiotic food and beverage channels in the sort of way needed by a behemoth in soda.

    And if you think Communist China is your soda market savior, think again. They are too smart to let someone pump some gas into colored water and walk off with the fruits of communism. Arafat would. Gadhafi would. Not Hu.

    A rising tide lifts all boats. But as you posted, KO's multiple is compressing, alarmingly so. The issue for you is what happens when the tide goes out (as Buffett is fond of pointing out)? Will KO continue on its travel to a single digit PE as it was prior to the Buffett investment?

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    • Correction...KO split in 96 and ran back to 86 in 98. has only been 11 years of pain and sorrow. you point out..the tide went out back then in 89 and many lost so much...not just KO holders.

    • Yes actually...I have been in KO since 1971 and have no intention of leaving! The past 15 years have been a struggle for sure Canoe, but the past is past. KO is no longer involved in/with the dark sides of hiding debt. I believe they are moving towards transparancy and this is another reason to be confident about buying now. Let's talk about the future w/out clouding it with poor management decisions of past administrations. KO trailed PEP by as much as $10/sh and we are confidently moving ahead. And hey...what about Diet Coke taking over 2nd place, huh...what about them apples?? :o)

      • 1 Reply to midlguard1969
      • OK midlguard, talking about the future is fine.

        But just a step back. You bought in '71. My commentary has basically been for the past dozen years. If my memory serves me well, you caught a bit of a ride when you first bought. Part of the "nifty fifty" era? Then you drove the depths with KO eventually priced at a PE of 8. Nobody gave it respect. It went up from those depths a bit, Buffett then bought in, Mr. G and Ivester concocted their off balance sheet transactions and KO soared - until the time of my first postings warning of winter.

        When I look to the future, I see KO now saddled with huge bottling assets. They bought N.A. operations of CCE. That's the mundane, slow growth (if any) low margin stuff that Mr. G and Ivester laughed at when the pawned it off on unsuspecting, gullible bottler investors.

        Now KO wants to be a bottler. What should that be given, a PE of 8? If you agree, then after the next year of financial manipulation, KO will have to declare the mundane profits as they really are. Will KO investors at that point be so gullible to not realize ROE for a bottler is the same as ROE for the brand? After all, KO is now back to soda - bottler with brand.

        Then you have a decade long absence of marketing skill at KO. The branding has been awful. No one sings the KO song. NO uplift. No new substantial products. A decade of blah.

        No momentum for your suggestion of viewing the future.

        Nah... there are better places for your money with lower risk.

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