Coca Cola - a change in trend

Whenever we think about a cool soft drink in a hot summer day, the first thing that comes to mind is Coca Cola.

According to some measurements, the stock (KO) was the best performing stock of the 20th century. If you had invested in a single share of Coke stock for $40 during its IPO in 1919, this would have turned into over $10 million with dividend re-invested!

Coca-Cola grew to fame and fortune in 20th century as it blanketed the world with its trademark beverage and leveraged that distribution network to popularize other brands like Sprite and Fanta. Today, Coke products are sold at drugstores, newsstands, restaurants, bars, cafes -- basically anywhere someone might need a drink.

During the last decade however, Coke, like many other sugary drink companies, have been facing a lot of downfall due to health concerns including obesity and diabetes. Various countries including the US and the UK have also passed soda taxes and sales of sodas have declined and as a result the stock also suffered greatly.

What is the situation now?

Coca Cola is known for its high dividend which it raised for 55 years in a row and currently stands at 3%.

The company has a very high PE ratio (33) and the price is currently facing a strong resistance point. Furthermore, just yesterday it already fell by a good % (have a look at the large red candle stick on the chart).

Although the company is very strong and it is always a good buy for the long-term investor especially those looking for income, I think that at the moment there is a very good opportunity to gain from the downside.

 

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