Sunday, March 23, 2014

First Pick in WMD Portfolio - Coca Cola

The more real they are, the more fun blogs are to follow. So in that spirit, rather than talking about ideas in the abstract I am launching a hypothetical portfolio to track ideas where I'll semi-regularly (and hypothetically) invest and track buying (and where required selling) shares.

For tracking purposes I will use $1,000 to keep it nice and simple. Portfolio page with goals and tracking is here.

 The first selection was pretty straightforward - Coca Cola. I have written a couple of times about Coke. Its a company that does not ever get too cheaply priced, but its seems fairly priced to me now. What's driving that price? Is it slowing consumption of soda in the US or moderating emerging markets growth? Or more likely both?

On some level those issues are washed away by Coke's quality, safety, and growth. Consider:

  • Debt/Equity: 0.6
  • Dividend Yield: 3.2%
  • 5 year dividend growth: 8%
  • Payout Ratio (FCF): 63%
  • Return on Equity: 26%
There is a lot to like with Coke - at $38.44 its look undervalued by double digit percentages, with room for continued growth, and dividend growth. Its a bit nerve wracking putting stock picks on paper (ok on a post) and then tracking them - especially starting this whole thing at an all time market high - but I believe in the process of buying above average companies at below average prices. Coke gives investors both of those things at today's price. So Coke at $38 feels like a great place to start a journey in search of wide moat dividends.

Follow the progress of the WMD Portfolio here.

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