An Ode to Coca-Cola

A new commentary every Wednesday - July 15, 2015

AN ODE TO COCA-COLA

Ubiquitous: An adjective that signifies that something exists everywhere. Perhaps no other product better personifies the word ubiquitous, than Coca-Cola (The company also owns the exclusive right to identify itself as "Coke"). It is franchised in 200 countries and in the very few countries where it's not made, entrepreneurs import it from countries where it is bottled and canned. It has been sold in China for 35 years and all across the Muslim world. (It's not specifically forbidden in the Quran—hasn't existed long enough!). Literature from the company claims that 1.9-billion servings of it are sold every day.

Most of us know that it had its beginnings in the American South shortly after the Civil war as a patent medicine. It was originally compounded by a pharmacist, who discovered that a combination of alcohol and cocaine acted as a hugely powerful pain killer. Cocaine in itself was originally not thought to be addictive, and in fact was used as a substitute for morphine, which was demonstrated to be addictive after having been used in battlefield applications in the Civil War. Since 1904, Coca-Cola has used a coca-leaf extract that is free of cocaine. It quit adding alcohol before 1900.

In 1888, a young druggist, Asa Griggs Chandler, gained control of the company from a group of investors for a total investment of $2,300. In 1919, another group if investors, led by Ernest Woodruff, president of the Trust Company of Georgia, paid $12-million for it—a vast amount of money at the time, and established its headquarters in Atlanta, Georgia, where it remains today. The company produces concentrate, which is used by licensed Coca Cola bottlers all over the world who hold territorial exclusive contracts.

In 1986, The Coca-Cola Company merged with John T. Lipton and BCI Bottling Holdings, forming Coca Cola Enterprises, Inc.

In 1988, Berkshire Hathaway, led by investor Warren Buffet, purchased more than 14-million shares of the company for close to $600-million. Buffett is famous for drinking Coca-Cola. A lot of it. I once read that he claimed that the soft drink comprises a quarter of his total weight at any one time. Whether that's true or not I don't know, but I read his autobiography, "The Snowball," this year and the canny old investor-philanthropist likes companies that pay dividends. He also believes in holding onto a stock forever.

I looked up what Coke has paid as a annual dividend on every share of stock in the past five years, and it comes to an average of $1.06 a share— rising from $0.98 in 2009 to $1.22 a share in 2014.

Ever since the Coca-Cola made that disastrous decision in 1985 to change its formula, the ship righted itself and the price of its common stock has been very stable, having nearly doubled in price in the last 20 years. Like US stock markets in general, it is near an all time high, fluctuating around $40-42 a share, just before the latest disturbance caused by the weakness in the Greek economy.

My sense as a contrarian is that the market is about to have a serious "correction" soon. Wait. Patience should be your watchword. One should be wary anytime the stock market hits an all time high. Only your financial advisor can tell you when the best time to invest. By financial advisor, I do not mean some new, hot-shot representative at a brokerage house. They want you to buy...or sell, often. for the more you trade, the more they make.

And please don't ask me for further advice on what to buy. In fact, it would be better for both of us if you just forget the above. That of course, it like asking readers to not think of a hippopotamus.

-Phil Richardson, Observer of the human condition and storyteller

Phil's current post can be read at: http://www.imrightagain.com

If you wish to comment, Phil can be reached at:

k7os (at) comcast (dot) net

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