Comments on: Coca-Cola, Ten Years and Still No Growth http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: sebastian http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-3538 sebastian Fri, 08 Oct 2010 22:46:49 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-3538 Hey Joe, Am I correct if I see any value again in KO? I used a Dcf analysis with a 15% dr and perpetuity rate of 3%. estimated value:86,3 with mos of 30%: 60,4. great site by the way! Hey Joe,
Am I correct if I see any value again in KO? I used a Dcf analysis with a 15% dr and perpetuity rate of 3%. estimated value:86,3 with mos of 30%: 60,4.

great site by the way!

]]> By: Lyle Trahms http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-2969 Lyle Trahms Mon, 10 Aug 2009 05:20:08 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-2969 I suppose if Buffet sell some Coke stock you bought some right away. I hope you did very well with that stock. I suppose if Buffet sell some Coke stock you bought some right away. I hope you did very well with that stock.

]]> By: david trahms http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-2474 david trahms Mon, 01 Dec 2008 17:53:23 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-2474 Buffett did sell some of his Coke stock.  He traded it at a P/E of 167 times earnings, in the General Re deal.  See chapter 15...The New Buffettology.   It was also a tax free exchange! Buffett did sell some of his Coke stock.  He traded it at a P/E of 167 times earnings, in the General Re deal.  See chapter 15…The New Buffettology.   It was also a tax free exchange!

]]> By: WJ http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-2471 WJ Sat, 29 Nov 2008 21:18:39 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-2471 Assuming Warren Buffett bought in 1988 at $40, a discount to the est. per share value of 59.16. 10 yrs later, in 1996, he revisited the valuation and came to the est. per share value of 30.45. Why did he not want to sell off when the market was maybe offering the price range of $50-72? Since in 1996, the $40 share price he bought would have been overvalued to the 1996 intrinsic value. Moving forward to 2006, the est. per share value haven't moved much at 30.85. But market is still offering it at 40-60plus per share, why didn't he want to sell it off then? Would it be because during the past 20 years, he have gotten more than enough dividends from the company and have effectively lowered his cost price to even below the intrinsic value of 2006. If that is the case, would it be more prudent for us investors to pursue constantly companies that pay dividends, instead of those who we think can re-invest the cashflow more effectively using the ROIC? As can be since in the Coke case, the ROIC projected returns was 9.3%, 41.9%, 23.9% 10yrs apart. As much as we believe the management can delivered on the ROIC, but the fluctuation is so great that it is better for us to have cash in hand (dividends) and re-invest where we want to. Assuming Warren Buffett bought in 1988 at $40, a discount to the est. per share value of 59.16.

10 yrs later, in 1996, he revisited the valuation and came to the est. per share value of 30.45.

Why did he not want to sell off when the market was maybe offering the price range of $50-72? Since in 1996, the $40 share price he bought would have been overvalued to the 1996 intrinsic value.

Moving forward to 2006, the est. per share value haven’t moved much at 30.85.

But market is still offering it at 40-60plus per share, why didn’t he want to sell it off then?

Would it be because during the past 20 years, he have gotten more than enough dividends from the company and have effectively lowered his cost price to even below the intrinsic value of 2006.

If that is the case, would it be more prudent for us investors to pursue constantly companies that pay dividends, instead of those who we think can re-invest the cashflow more effectively using the ROIC?

As can be since in the Coke case, the ROIC projected returns was 9.3%, 41.9%, 23.9% 10yrs apart. As much as we believe the management can delivered on the ROIC, but the fluctuation is so great that it is better for us to have cash in hand (dividends) and re-invest where we want to.

]]> By: Joe Ponzio http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-2098 Joe Ponzio Tue, 16 Sep 2008 14:49:10 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-2098 Navsi, Check out the series of posts beginning with <a href="http://www.fwallstreet.com/blog/25.htm" title="Part I of How to Value a Business">Part I of How to Value a Business</a>. Navsi,

Check out the series of posts beginning with Part I of How to Value a Business.

]]> By: Navsi http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-2079 Navsi Mon, 15 Sep 2008 09:59:46 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-2079 Hey I have just started learning about long term investing. Could you please help me know how to value the business of a company. And also what is the intrinsic value of a company. Thanks Navsi Hey

I have just started learning about long term investing. Could you please help me know how to value the business of a company. And also what is the intrinsic value of a company.

Thanks

Navsi

]]> By: Joe Ponzio http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-1857 Joe Ponzio Sun, 22 Jun 2008 09:11:10 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-1857 Alan, Check out <a href="http://www.fwallstreet.com/blog/60.htm" title="this post">this post</a> - a review of The Warren Buffett way, and specifically Coca-Cola. Hope it helps. If not, let me know. Alan,

Check out this post – a review of The Warren Buffett way, and specifically Coca-Cola. Hope it helps. If not, let me know.

]]> By: Alan http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-1854 Alan Sat, 21 Jun 2008 13:37:39 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-1854 Hi, i'm trying to get my head around value investing and have been reading the Warren Buffet way. The valuation of Coke in the book using discounted owner earnings is considerably different to the valuation for the same period using the method on this website. I can't get the two to correlate. Any ideas? I've spent a good few hours looking into this. Thanks... Hi,

i’m trying to get my head around value investing and have been reading the Warren Buffet way. The valuation of Coke in the book using discounted owner earnings is considerably different to the valuation for the same period using the method on this website. I can’t get the two to correlate. Any ideas? I’ve spent a good few hours looking into this.

Thanks…

]]> By: Joe Ponzio http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-128 Joe Ponzio Mon, 13 Aug 2007 05:15:25 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-128 Hi Charlie, Hindsight is 20/20 so to answer your question - yes, 16.2% is too high a value. In 1996, all we knew was that Coke <i>was</i> growing owner earnings at 16.2%. Unless we had a reason to suspect that it wouldn't continue, 16.2% is the only number we had to go on. Here's the thing: Using the actual results, <strong>the value of Coke was actually much lower</strong> than we estimated in 1996. As such, the idea that investors should have expected no growth was further reinforced. Hi Charlie,

Hindsight is 20/20 so to answer your question – yes, 16.2% is too high a value. In 1996, all we knew was that Coke was growing owner earnings at 16.2%. Unless we had a reason to suspect that it wouldn’t continue, 16.2% is the only number we had to go on.

Here’s the thing: Using the actual results, the value of Coke was actually much lower than we estimated in 1996. As such, the idea that investors should have expected no growth was further reinforced.

]]> By: Charlie http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth/#comment-120 Charlie Wed, 08 Aug 2007 20:50:12 +0000 http://www.fwallstreet.com/article/17-coca-cola-ten-years-and-still-no-growth#comment-120 In the 1996 analysis, the projected free cash flows for 1997-2006 are so much more than the actual values of these years shown in the 2006 analysis. Does this mean that the 16.2% growth rate is not a good number to use in the 1996 analysis? In the 1996 analysis, the projected free cash flows for 1997-2006 are so much more than the actual values of these years shown in the 2006 analysis. Does this mean that the 16.2% growth rate is not a good number to use in the 1996 analysis?

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