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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Judith Williams who wrote (40370)	3/13/2001 12:21:32 PM
From: Bruce Brown	Read Replies (1) \| Respond to of 54805

Whether KO's PE is 38 or 58, a potential investor is paying a lot for presumed safety. That tradeoff is simply not one that is compelling to me. I would argue that a Qcom or a Sebl offers more safety over the long haul--even if you get heartburn multiple times along the way. Yes, that is the Coke premium - be it franchise, brand name, IPR sugar water formula locked up in Atlanta or all the kids bouncing off the walls the world over drinking the stuff on a daily basis. Granted, Warren Buffett bought his stake in Coke when the premium was not quite as it is now - if at all. In structuring a portfolio, just as there are reasons we want a Qualcomm or a Siebel in our technology portion of our portfolios, there are many dominant characteristics an investor should look for in non technology stocks to balance out a portfolio. Has the premium for Coke been 'too much' in regards to their growth rates of late? Well, the answer was addressed as the share price came down from the $80's in 1998 to the $40's in 2000. That's why I was doing some recent study of Coke. I used to own Coke, but no longer do and was spending some time evaluating some things. I used to own Phillip Morris for years, but was scared out with all of the legal issues. No need to mention that over the past 12 months, tobacco stocks have been on 'fire' - and I mean fire. The group is up over 100% and the King of smokes and snacks - MO - went from the teens to $52 as the money flowed from technology into the defensive issues. I missed that one on purpose as I as still too afraid of the legal issues. Not to get off subject talking about the Marlboro man, but if you study the dominant leaders in non technology, you will find premiums paid for the leaders in regards to the overall market or segment they participate in not unlike what we 'expect' from our technology leaders. So companies like Coke, Home Depot, Wal-Mart, Pfizer, Amgen, Cardinal Health, General Electric, etc... may not seem like 'exciting' investments in comparison to dominant technology companies - but they are out there and premiums in non technology are paid and do exist. No need to mention that plenty of flight to safety was conducted over the past 12 months. We've seen some profit taking begin in many of the 'safety' issues, but who knows where it is all going to be going. BB

To: Judith Williams who wrote (40370)	3/13/2001 2:03:15 PM
From: EnricoPalazzo	Respond to of 54805

Whether KO's PE is 38 or 58, a potential investor is paying a lot for presumed safety. That tradeoff is simply not one that is compelling to me. I would argue that a Qcom or a Sebl offers more safety over the long haul--even if you get heartburn multiple times along the way. I don't think an investor is necessarily paying for safety. I think an investor is paying for the following: -high ROIC & margins, due to a world-leading brand -a perceived enormous CAP. Coke has grown over the past 70+ years, and there's really no reason to believe it won't grow over the next 70 also. Between their stellar brand and their top-notch executives, I expect they will be able to continue profitable growth for a long, long time. I find it odd that tech investors always pull out KO when they want to talk about overvalued non-techs. Oxford Health as a pinata, fine. But KO is one of the best businesses the world has ever seen.