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Have a Coke



April 23, 2010 – Comments (0) | RELATED TICKERS: KO , BRK-B

One week and counting! It is not long now before we start getting reports from the ground in Omaha on what Warren and Charlie have to say about the state of affairs in our markets and what it may portend for the near-term. I for one cannot wait to hear what Philip, Joe and Andy have to say. I, your faithful analyst Jason, will be waiting here at Fool HQ to hear the news and I can tell you one thing: I will be drinking a Diet Coke (or maybe even a Cherry Zero if I’m feeling saucy) while I wait. And that leads me to my post here.

I have lived in Cairo, Egypt and Astana, Kazakhstan and one thing that has always amazed me (besides the heat in Egypt and cold in Kazakhstan) is the availability of Coca-Cola products all over the world. I mean we know it as the ubiquitous drink that is as American as apple pie here. But there can be no doubt that Coca-Cola qualifies as a global phenomenon. And I don’t know about you, but I can understand why someone might want to invest in such a thing. Look at the earnings they just announced. Coke’s profits climbed 19% thanks to emerging markets. That’s right folks, while we may have Coke down to a way of life here in the States, there is a whole world out there still growing the love. Examples: India’s case unit volume grew 29% and Turkey’s grew 18%. I mean those are significant numbers and Coke knows it. So what if earnings “missed analysts’ expectations.” We are not so short-sighted here at The Fool. They understand that their growth depends on that overseas investment. Considering that approximately 75% of the company’s revenue came from outside of North America this past quarter, I think it is safe to say that the pursuit of growth has officially gone overseas. The beauty of it is that even with market and commodity fluctuations here Stateside, sure the company’s stock will see its share of ups and downs. But there is a whole world of growth out there. And can you imagine a world (or at least a country) without Coke? I sure can’t. And what’s more is I don’t want to.

So is it this ubiquity that Buffett likes so much? Partly. I mean the guy talks about how Snickers bars are such a great investment because people will continue to want them and that recurring revenue stream is rather dependable. But even more, you gotta love Coke for the cash the company generates. In 2009 alone the company recorded more than $6 billion in owner earnings. That is money that goes toward growing the business (remember that emerging markets thing?) and other things like paying one heck of a consistent dividend. As a matter of fact, the company just announced its 48th consecutive annual dividend increase when it raised the quarterly dividend 7% from $0.41 to $0.44 per share. That is pretty steady-Eddy, especially when you take into consideration what we have been through over the last few years. It’s no wonder Coca-Cola holds such a warm spot in Buffett’s heart…and Berkshire’s (and our Core) portfolio.


TMFJMo (long BRK/B)

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