This article is an excerpt from Barron’s 10 favorite stocks for 2021. To see the full list, click here.
Coke shares, which are off 4% this year to $53, offer an underappreciated reopening play along with a safe, bond-like 3% dividend yield.
Coke also offers exposure to developing economies and a weaker dollar; 75% of its profits come from outside the U.S.
It is also a restructuring story, as CEO
has sold bottling businesses to create a capital-light company that is more focused than ever on beverage innovations.
The company remains dependent on carbonated soft drinks, which account for about 70% of sales, but contrary to popular perception, that category is expanding globally.
“The beverage industry is a growth industry, and we are the market share leader not just in soft drinks, but also in other major categories, and we are gaining share,” Quincey told Barron’s in October. Coke expects to “recover faster than the broader economic recovery.”
The stock isn’t cheap, trading for 25 times estimated 2021 earnings of $2.11 a share, and the earnings recovery is slowing with Covid-19 lockdowns and other restrictions around the world. But Coke could generate double-digit profit growth when global economies recover and become a must-own consumer stock.
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