ho ho, coincidence that the last time this POS had a loser yr was pre-bull mkt?
Coke Shares Face Losing Year
The longest winning streak among stocks in the Dow Jones Industrial Average may end this year: Coca-Cola Co. is heading for an annual decline for the first time in almost two decades.
Coke shares have slid 20 percent this year as slowing sales and a product recall in Europe squeezed earnings. They've had only four worse years since they were listed in 1919. The last annual drop was in 1980, when they fell 0.03 percent.
Whether this year's slump is the start of a new streak or a blip on the price graph depends on the ability of the world's biggest beverage company to turn around slumping sales and convince Wall Street it can meet its profit forecasts. This week's 8.2 percent gain, the biggest in seven months, suggests it may have declined enough for some investors to dive back in.
''For those that are patient, it's a great opportunity,'' said Dan Eagen, who manages $2 billion for BlackRock Advisors Inc. in Philadelphia. Coke has plunged 40 percent since rising to 87 15/16 on July 14, 1998, slicing a price earnings ratio that had reached 60, double the S&P, leaving no margin for errors. The stock's p/e ratio fell to 40 -- higher than the S&P's estimated 1999 average of 26 -- but the lowest since 1995, according to Bloomberg data.
''It deserved to get shot. People were tired of paying such high multiples,'' said Jim Grefenstette, senior portfolio manager at the $931 million Federated Growth Strategies Fund. ''People won't buy back now until they see sales growth accelerate.'' He said holds Coke accounts for less than 1 percent of his holdings and he's not buying more now.
Investors
That skepticism underlined a change in sentiment that has buffered Coke shares during other high-profile bungles before this year's $75 million European product recall.
When the company changed the recipe for its trademark soda in 1985, for instance, enraged customers demanded the return of the old Coke and the company complied within three months. The shares finished the year up 35 percent, outpacing the Dow's 28 percent rise.
''If anything, it was the best thing they could've done,'' said Bryan Spillane, an analyst at Warburg Dillon Read who has a ''hold'' on Coke. ''By changing the formula, they raised its visibility and drove people back to the brand.''
With earnings faltering now, though, shares are slumping. Coke said in early September that the recall in Europe, higher marketing costs and sluggish sales in some overseas markets will hurt earnings in the third and fourth quarters. That warning dashed hopes for a quick turnaround following Chairman Douglas Ivester's assurance that ''the worst is behind us.''
Shares dropped 4.8 percent after the announcement and slid to a two and a half year-low of 47 90/16 on Oct. 4.
Coke is the third-worst performer this year in the Dow, which has gained 16 percent. Only Philip Morris Cos. Inc. and Sears, Roebuck & Co. have done worse.
Coke's decline has dragged down plenty of investors' returns, none bigger than Warren Buffett. His Berkshire Hathaway Co. is Coke's biggest single shareholder, with an 8.1 percent stake as of June. Berkshire shares are having their worst year since 1990, plunging 18 percent.
Hard Fall
It's been a hard fall for a stock that's made a lot of money for folks.
The beverage maker has about 2.4 billion shares outstanding, compared with the Dow's top stock, American Express Co., which has just 448 million.
''Coke is considered a core holding,'' said Richard Joy, an analyst at Standard & Poor's Corp. who covers the beverage industry.
Someone who bought a single share of stock when Coke first went public on Sept. 5, 1919 would now have 99,600 in her portfolio following 10 stock splits. If she'd reinvested her dividends, the value of that one share would have grown to more than $6 million at the end of 1998, according to the company.
It's fallen in only four previous years: a 58 percent plunge in 1974; 30 percent in 1950; 26 percent in 1941 and 30 percent in 1931.
Only one current member of the S&P has risen for more consecutive years than Coca-Cola: Boise, Idaho-based Albertson's Inc., a supermarket chain, has risen for 24 years, according to Richard Hartley at Market History, a Chicago-based historical market research firm. Albertson's too, will likely fall this year; it's down by 39 percent so far.
Faith
Some Coke investors have kept the faith.
''It's a fact that the stock has underperformed,'' said Patricia Haffner, director of equity research at St. Louis-based Bank of America Investment Management, which manages about $124 billion. ''Our feeling that the stock has bottomed. I think it'll be a little higher than it is right now,'' Joy said. ''It's a good time to buy.''
A.G. Edwards analyst Tim Swanson this week raised his rating to ''buy'' from ''maintain position.''
After reaching its two and a half-year low this week -- the 80th anniversary of the company's initial public stock offering - - the shares have jumped 12 percent.
George Thompson, an analyst at Prudential Securities, has followed Coke for more than 20 years. He's strongly recommended investors buy the stock since August 1998.
''People think it's overvalued,'' Thompson said. ''But it's better positioned than ever to compete. The reason is that they've consolidated the bottling system and it's difficult for others to compete. What will trigger the stock now will be an economic recovery outside the country.''
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