Coca-Cola: A buying opportunity to seize despite currency fluctuations

Is it necessary to present Coca-Cola ? 1.5 billion bottles are sold every day across the planet. The company was founded in 1887 and its inventor, pharmacist John Pemberton, advocated the use of the drink to treat stomach problems. It is true that Coca-Cola can be a great help on some difficult mornings... Paradoxically, Originally, this drink contained alcohol and even cocaine! But Coca-Cola has other qualities from a financial point of view...

Coca-Cola is the world's largest manufacturer, distributor and marketer of non-alcoholic beverages. Based in Atlanta, Georgia, KO sells concentrated forms of its beverages to bottlers who produce and sell the finished products to retailers. Coca-Cola operates in over 200 countries and sells over 400 different brands that produce over 3,000 different products, including the famous Coca-Cola and Sprite.

When you think about Coca-Cola and investing, Warren Buffett comes immediately to mind. The company is indeed theone of Berkshire Hattaway's most profitable investments, the investment company of the famous American billionaire. The latter is also one of the main shareholders of Coca-Cola.

The stock made a huge jump between 1980 and the end of the 90s (+7'000%!). Since 1998, the stock has "calmed down", which has allowed a sharp drop in the price/earnings ratio (from 100 in 2001 to less than 19 currently). We are currently in valuations from the point of view of profits identical to those of the 80s., so interesting.

KO offers a long term average return appreciable of 3.09%. The average annual dividend growth is not very high, at 6.97%, but The company has been able to increase its distributions for 49 consecutive years, which is quite exceptional. The distribution rate of 50.95% gives Coca-Cola room in the event of a difficult transition and ensures distribution growth in the future.

KO also has another very appreciable quality: its volatility in CHF is only 9.90%. Indeed, the company is not only in a defensive sector, which is confirmed by a beta of only 0.53, but it also benefits from a significant share of exports, thus protecting it against currency risks. We had also bought KO last February 2011 as part of our diversification strategy against the risk of a fall in the dollar.

Coca-Cola earns about 75% of its revenue from international sales., which exposes it to currency fluctuations, which are favorable with a weak U.S. dollar. When foreign currencies strengthen against the USD, goods sold in foreign markets are worth more money, which increases KO's profits. This is characterized by a $risk of -0.61, confirming that when the dollar falls against the CHF, the value in the Swiss currency of KO tends to increase.

Taking into account these interesting fundamentals, our analysis model considers that Coca-Cola is still a buying opportunity today.