One Of The Greatest Companies In America

| November 24, 2009 | 0 Comments

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.

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.

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Category: Stocks

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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