One Of The Greatest Companies In America
The Dynamic Wealth Report
November 24, 2009
Coca Cola. The name says it all. The sweet, sugary drink has been a
favorite for more than 123 years now. The company that makes it is one
of the world’s largest and best known companies.
Coca Cola (KO) anchors the Dow Jones Industrial Average.
Coke has been a member of the esteemed group since 1987. It’s not the
oldest member, but it can be the most influential at times.
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The company counts Warren Buffett, one of the world’s most famous
investors, as a key shareholder and company sponsor. You often see
Warren cracking open a can of some Coca Cola product.
It’s no secret Buffett’s been a long time Coke shareholder. What I
didn’t know is Barry Diller is a big investor too. I stumbled across
this tidbit of information reading the Wall Street Journal one morning.
I did a bit of research… and I uncovered something really interesting.
But first… who is Barry Diller?
Diller is a giant in the television and movie studio world. He worked
for a time at ABC, Paramount, and Fox. He owned Home Shopping Network
and now runs IAC/InterActiveCorp. This company owns a number of high
profile websites and other media properties.
Diller’s resume is quite impressive… Chairman of the Board of Expedia, a
Director of The Washington Post, and Chairman of the Board of
Ticketmaster. Most importantly, he’s a director at Coca Cola… and has
been since 2002.
But here’s the bigger point. As one of the world’s richest men, he clearly knows how to make money. For the record, he’s listed as number
341 on the Forbes 400 list.
How savvy is Diller?
His big move in Coca Cola came in March 2008. He sold 1.2 million call
options against his KO shares. He was essentially betting the price
would fall in the coming months.
He was right and he pocketed a cool $11.9 million!
Then a year later he did something different. With the market trading at
decade lows, he stepped in and gobbled up some 500,000 shares of KO for
just under $40 a share. The stock’s now worth more than $56 a share.
That’s another cool $8.0 million in profits in just nine months.
Clearly the guy knows the market… and he knows Coke’s stock.
The latest news… Diller’s buying more KO. In October, he picked up
another 510,000 shares. He’s putting up $27.6 million to buy these
shares.
Here’s the big question… Should we follow Diller and buy some KO
ourselves?
Coke is a phenomenal company. In addition to their main brand, they sell
3,000 other products in more than 200 different countries. The company
employs more than 92,000 people and has been in business for 123 years!
The stats are astounding.
At a recent Analyst Day, management put forth a plan to double company
revenue between now and 2020. A very ambitious goal… but I think it’s
possible.
Coke gets almost 75% of its revenue from overseas. That means they’re
capturing part of the growth occurring in places like China, India, and
Brazil. As these markets develop and grow, demand for Coke products will
certainly grow as well.
The company’s third quarter numbers were mixed… but the falling US
Dollar will help results in the future.
Unit sales were up 4% in emerging markets. Cash from operations is an
astounding $6.3 billion year to date, a jump of 11%. Reported operating
income fell but that was because of US Dollar exchange rates. Using
steady rates, their operating income was up almost 9%.
Financial numbers for Coke will only get better. Remember, for the last
few months the US Dollar has been falling in value. And as the Dollar
falls, their earnings grow.
If you ask me, the short term numbers for Coke should be solid and
their long term plans are ambitious but achievable.
If management is able to double the size of the company in the next ten
years, we should see the stock do equally well… if not better. As a core
holding, Coke looks like a great company… and I’d say this even if Barry
Diller and Warren Buffett weren’t investors. Consider buying some for
your own account.
Cloud Peak Energy (CLD) went public last week at $15 a
share and fell shortly after the start of trading. The company is
the third-largest coal producer in the Powder River Basin. Concerns over
the coal market may be contributing to its lukewarm reception.
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