Coke Is Still It

In This Issue: Coke Is Still It The Problem With a Strong Dollar How Bob Made an Easy $110,000 Tax-Free Last Year Bob saved all his life and built a seven-figure nest egg. But with bonds and CDs paying less than 2%, he still struggled to pay his bills without draining his savings account… until he discovered this low-risk investing method. Last year, he used it to make around $110,000 in extra income. Better yet, the money is all deposited into his IRA, so he doesn't have to pay a dime in taxes until he withdraws it. Details here. Coke Is Still It 10/07/2014 By Thomas Scarlett In these uncertain times for the stock market, it's a wise course to invest in companies with rock-solid brand names and long-term dominance of their industries. It's hard to think of a company that fits that description better than Coca-Cola (NYSE: KO). According to Beverage Digest, Coke's brands collectively controlled 40.5% of the U.S. carbonated soft drink market in 2013, well ahead of its leading rival PepsiCo (NYSE: PEP). Even in a head-to-head competition between the flagship brands---Pepsi versus Coke---Coke emerges the winner, with 17% of the market compared to Pepsi's 9.7%. The company also has a huge asset in the Coca-Cola banner, which was named the world's top brand for the 13thtime on brand-consulting firm Interbrand's annual list. In addition to Coke, the company's brands include over 3,500 beverages, which it sells around the world, including diet and sparkling colas, fruit juices, water, sports drinks tea and coffee. Coca-Cola shares, too, are renowned for long-term, consistent growth. The stock has risen over 60% in the past five years. And it has made the climb with remarkable consistency. The stock carries a beta rating of just 0.51, which means it's almost exactly half as volatile as the overall market. Warren Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) is the company's largest shareholder, with an 8.9% stake. "Every investor's goal should be to find companies with sustainable competitive advantages like Coke,"writes Investing Daily's Jim Fink. "Coke's cola has always tasted the best and cannot be cloned despite endless efforts by competitors to do so. Coke's worldwide exclusive distribution network is virtually impossible to replicate. When you combine the best product with the best distribution network, you have an unbeatable business." Not to be overlooked is the company's long history of returning capital to shareholders, both through reliable dividends and share repurchases. Coca-Cola is also one of America's most reliable dividend-paying stocks. The company has paid dividends for 84 consecutive years---since 1920---and has raised its payout every year for the past 50 years. The current annual rate of $1.02 a share yields 2.69% on a yearly basis. The company's ongoing share repurchase plan is another often-overlooked benefit. Coke has spent $2.5 billion on buybacks through the first three quarters of the year. The company's latest earnings report had a lot of positives. Global unit case volume grew 3% in the quarter and 2% year to date.Coca-Cola International volume grew 3% in the quarter while North America volume was even. Sparkling volume and brand Coca-Cola volume accelerated in North America, Eurasia and Africa, Europe and Asia Pacific in the quarter. Global price/mix increased 2% in both the quarter and year to date. Reported net revenues declined 1% in the second quarter and 3% year to date. Excluding the impact of structural changes, comparable currency neutral net revenues grew 3% in both the quarter and year to date. Reported operating income declined 2% in both the quarter and year to date. Excluding the impact of structural changes, comparable currency neutral operating income grew 5% in the quarter and 6% year to date, resulting in improved operating margins while it continued to invest for growth in our brands with its global system partners. Second quarter reported EPS was $0.58, down 1%, and comparable EPS was $0.64, up 1%. Comparable currency neutral EPS increased 6%. Year-to-date cash from operations was $4.5 billion. Coke also said that unfavorable exchange rates held back its operating income by 7% in the quarter. The company's gross margin rose to 60.7% from 60.2% a year ago. Despite the sales miss, the company saw higher sales volumes across all its divisions, led by Eurasia and Africa, where volumes rose 11%. India continues to be a growth area for Coca-Cola. The company saw overall volumes rise 15% in the country in the latest quarter, with its main Coca-Cola brand posting a 34% increase. Sprite gained 15%. The company said its Indian growth is balanced across all of its package sizes. It also sold more juices and juice drinks, such as Minute Maid Pulpy and Maaza. The company's Indian unit now controls 25% of the country's soft drink market, ahead of PepsiCo's 20% share. Domestic soft-drink maker Parle Bisleri also has a 25% stake. Coke now plans to invest $5 billion in the country by 2020. The company will to use this cash to expand its distribution networks, introduce new products and increase its manufacturing capacity. That will help it better attract consumers as India's middle class keeps growing. So Coca-Cola retains its dominant position in the world's most enviable market -- the United States -- and has ever-stronger growth prospects abroad. Sounds like the next five years will be just as sweet as the last five years have been. Tom Scarlett is an investment analyst at Personal Finance. The Silver Lining in Obamacare? Obama promised us affordable healthcare. He promised huge cost savings by implementing electronic health records throughout the health industry. It's mandated by law that all healthcare providers must switch by 2015. The jury's still out on whether this will lower costs. Meanwhile, four companies have gotten ahead of this new healthcare technology requirement. For you and me, it's the chance to invest in a government-demanded windfall – almost $315 billion by 2018. Now that's a promise you can believe in. The details are here. The Problem With a Strong Dollar 10/06/2014 By Richard Stavros The dollar is on its longest winning streak in more than 17 years and is now trading at a four-year peak against other currencies, but don't rejoice. This is not a good time for the dollar to be strengthening. A stronger dollar will make U.S. exports more expensive to foreign customers, and that could cut into the profits of many U.S. companies, which could harm or stop the recovery. And the strong dollar could lead to price deflation, which could also harm the recovery. While a strengthening dollar was not a big issue when U.S. exports were a small part of corporate earnings, now more than 40% of profits for Standard & Poor's 500 firms come from overseas. And these profits from higher-growth emerging markets have offset lower growth in the U.S. and other developed economies. Of course, some analysts believe that the dollar strengthening isn't so bad. They think it's just a reflection of investors looking forward the Fed raising interest rates as the U.S. economy improves. Higher rates means higher demand for dollar-denominated debt, which pushes up the price of dollars. Some analysts have even speculated that the dollar's strength will be a boon for U.S. equity markets as it means more investment will come to U.S. companies. But that assumes our recovery is on solid ground. The U.S.economy expanded at an annual rate of 4.6% in the second quarter, according to the Commerce Department. But this is following a first quarter where GDP contracted by 2.9%. So declaring that the U.S. economy has turned the corner is premature. The housing market still struggles, consumer spending is still weak and jobs being created are lower paying. The U.S. economy is still projected to deliver a tepid 2% growth for the year, according to Federal Reserve projections. I'd like to see a few quarters of consistent growth before concluding the U.S. recovery is here to stay. And the U.S. economy would have to deliver better than 3% GDP growth annually before I would even think to break out the champagne. Rise of the U.S. Dollar: Fall in the U.S. Economy? At least most asset managers predict the dollar strengthening won't mean a great sell off, as happened last summer when Ben Bernanke's stimulus tapering comments led to a huge drop in emerging market stocks. Investors at the time thought that the tapering meant that rate increases were imminent, only to be told later that the economy was much too weak for rate increases anytime soon. Investors are unlikely to jump the gun twice. In designing the Global Income Edge portfolios, I looked for companies that could protect against a sudden decline in growth in developed or developing economies by offering diversification -- as well as making the portfolio deflation proof by choosing industries that have pricing power. National Grid (NYSE: NGG) is a good example of a Global Income Edge portfolio company that offers both international diversification and protection against deflation. The energy utility is diversified, with 65% of its operations in the UK and 35% in the U.S. And given the firm has pricing power via regulated rates it sustain profits in periods of deflation. In the healthcare area there's GlaxoSmithKline (NYSE: GSK) a firm that distributes its pharmaceuticals and consumer healthcare products throughout the world in a sector that clearly has pricing power given the demand for high quality healthcare. This article originally appeared in the Income Without Borders column. Never miss an issue. Sign up to receive Income Without Borders by email. Prediction: Biggest Profit Opportunity of the Year One country is about to take its place as a major global energy source, overshadowing Saudi Arabia. Sadly, it's not America. This country has one trillion barrels of oil, and they're not shy about extracting it or selling it. This country is about to move into economic-superstar status. I know six companies in superb position for a huge profit surge – triple-digit gains and double-digit yields. Details here. 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