Coca Cola Tag

Good Companies Don’t Always Make Good Stocks

in Analysis

I was recently going through a new client’s portfolio and found it full of the likes of Coca-Cola, Kimberly-Clark and Campbell Soup — what I call (pseudo) bond substitutes. Each one is a stable and mature company. Your mother-in-law would be proud if you worked for any one of them. They have had a fabulous past; they’ve grown revenues and earnings for decades. They were in their glory days when most baby boomers were coming of age. But the days of growth are in the rearview mirror for these companies — their markets are mature, and the market share of competitors is high. They can innovate all day long, but consumers will not be drinking more fizzy liquids, wearing more diapers or eating more canned soup. If you were to look at these companies’ financial statements, you’d be seriously underimpressed. They paint a stereotypical picture of corporate old age. Their revenues haven’t grown in years and in many cases have declined. Some of them were able to squeeze slightly higher earnings from stagnating revenue through cost-cutting, but that strategy has its limits — you can only squeeze so much water out of rocks (unless someone like 3G Capital takes the company,...

The Values of Value Investing

in Analysis

This article has been in the works since last November.  It started out as a speech I gave to the Swiss CFA Society.  To me it is an important framework for understanding value investing.  I think the rise of the consulting industry, armed with cheap computing power and an abundance of stock-specific data, has harmed the industry, because according to them, a “value” investor is one who holds statistically cheap stocks and a “growth” investor is one who holds statistically expensive stocks.  The truth is somewhere … well, actually it’s a lot more complex, and the consulting industry's crude segmentations don’t capture it.  - Vitaliy The Values of Value Investing I organize a conference every summer called VALUEx Vail. Vail is a quaint, beautiful, ritzy ski resort town tucked away in the gorgeous Rocky Mountains, about 100 miles from Denver. One day I received an e-mail from a reader asking why I — a value investor — would have a conference in an expensive place like Vail. He suggested that as a true value investor I should hold the conference in a hotel somewhere by the airport where prices are much cheaper. His precise comment was, “I thought value investors were supposed to like cheap stuff.” This e-mail challenged my...

Crony Capitalism and the Oracle of Omaha

in Process

I am back from the Berkshire Hathaway annual meeting in Omaha, Nebraska, and my brain is still spinning from the dozens of meetings and stimulating conversations. In a series of articles over the next few weeks, I’ll try to download the thoughts that were triggered by this trip, a lot of them unrelated to the main event — the Warren Buffett & Charlie Munger show — but rather by-products of the conversations I had. After I wrote about my disappointment with Buffett’s mishandling of Coca-Cola Co.’s “excessive” compensation plan, I got an e-mail from Carol Loomis asking me if I wanted to ask Mr. Buffett a question about Cokegate. Loomis is the Berkshire Hathaway CEO’s longtime friend, editor of his annual shareholder letter and one of three reporters at the annual meeting who ask Warren and Charlie questions submitted by readers. Here is the question I submitted: I’ve been coming to shareholder meetings for seven years, and for the first time I’m seeing two Warren Buffetts: The first is the moral compass of corporate America — the standard of corporate ethics and integrity (the one we see in the Salomon Brothers scandal intro video year after year). And then last week a second Warren...

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"Vitaliy Katsenelson is the new Benjamin Graham."
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"Vitaliy Katsenelson is the new Benjamin Graham."
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