I guess it will be over $10B just from inflation in 28 years.

Yeah, they are apparently not even Walmart quality anymore, which is bad.

The best scenario is for someone to give a tender offer on all the shares, or the very least, the CEO's stake and then issue a dividend. That could very well happen, and is not an unlikely scenario at all.
Or maybe they just slowly sell the shares to the public, and then the activist shareholders do something.

I guess we'll have a better idea when earnings come out.

its predicted by 2040 the world population will reach 9bn (28% increase) -- for a company like coca-cola this has to be important right? thats 27 years, consider inflation, its competetive advantage, its ability to market and establish itself in growing countries.

I think that is why Buffett likes stocks like Heinz and Coca Cola. If stock A pays a 3% dividend and Coca Cola pays a 2% dividend and they basically have the same near term growth prospect. Coca cola might actually be a better buy. Coca Cola might have a 500 year lifespan and all those dividends converted to the present value would make KO a better buy even though the dividend is presently smaller.

http://www.dividendgrowthinvestor.co...-investor.html

yeah pretty much, this article goes into more depth and agrees.

buying into companys that will eventually produce huge amount of cash flows in dividends that can then be invested into other companys.

you guys are thinking about it all wrong. enjoy your gdp like returns.

What do you mean GDP returns? Could you elaborate?

For KO in particular I'd expect it to be more closely linked to global population growth AFTER it has fully saturated every market on planet earth. KO has been able to grow at its current clip over the past century because of continual new markets to exploit. I wouldn't expect their growth to even keep up with GDP growth in fully saturated markets like the US... But in a place like Vietnam or Cambodia they could quite easily (and have in the past achieved) 100-200% growth rates for several years until they have fully exploited the market.

I think it's slightly more complicated than 'gdp like returns' is what I'm saying. Not saying it has a prayer of duplicating its past results though... There are no more 400M person countries where drinking alcohol is religiously forbidden left to exploit

i think AMD is going to be worth a double or 2 when the new consoles starts selling.

didnt warren buffet say youll only have 5/6 really great investing ideas in your lifetime?

I can't see KO being one of them but in terms of companies that you could rely on for a decent dividend in years to come with it being increased annually -- that has to be important right? returns in the form of cash to invest in other companies.

http://www.amazon.com/The-Outsiders-...=the+outsiders
reading this one now, pretty good, would recommend if you want to become better investor.

you arent going to make 10% per annum owning coke for the next 30 years. you will make something like 3% for inflation plus 3% for gdp growth, thats all. Maybe they do an amazing job and manage to grow at 3 + 5%.

there are better places to be looking and spending your time than coke.

seriously, iv said it like 10 times in this thread already, you arent going to have great returns looking at megacap stocks in a normal market.

or in expensive markets

I disagree.

I agree.

Define "great returns" isn't the average 10% p.a. does that only mean capital growth or include dividend payments?

The way i look at is you earn the earnings yield plus growth rate as a rough annual return calc. So 5% yield plus 3 - 7% growth is 8% - 12% return.

Also, 3% inflation plus GDP growth? Inflation is part of GDP growth. So it would be an all in 6% GDP growth?

Not debating that you can't get 15%+ returns in Coke. Don't think anyone expects that.

I agree with you... I don't own Coke for the reasons you say. In the short term (2 years and less) other than when there is some event driven, news oriented reason a megacap company/industry falls giving you a great opportunity to hold your nose and buy to make outsized returns. But generally IF you know what you're doing you likely can do better in undercovered names.

But ... something like KO is for someone who doesn't want to do any active management. Someone who wants to set it and forget it -- perhaps someone who has an extremely demanding job and no time to actively manage or who doesn't want to. I'd argue that if you're not really into investing and want to buy an individual company (ignore index funds for a second) for the long term, you'd do OK with KO. Especially if your alternative is CDs and/or treasuries. If you're looking for a company to buy and hold for 30 years (I've never done this so I'm out of my circle of competence) can you say with any certainty that xyz company would give you better risk adjusted returns than KO over 30 years?

My main point originally was to simply say that 30 years is a hell of a long time and that it's tough to actually make accurate bets/handicap situations with that type of time frame. 30 years ago people sitting around a table would have never thought that Coke could grow this much. (OFC it's that much harder now since they've covered more of the world -- of course Africa is a huge frontier for them). I mean 30 years ago interest rates were in the mid teens, manhattan apts were like 100k, michael jordan hadn't been discovered yet, the cold war was still going on, the first mac hadn't come out yet, and Coca Cola had not launched NEW COKE yet .

lets say you want to put half your money in the market and not look at it. Whats better after lets say a big market correction, buy coke at a reasonable price and not look at it the next 30 years, or buy the market? Risk seems very low with coke, and your return is probably going to be much better compounded over those 30 years?

for those who think coke can grow at 10%+ for 30 years...

using my nominal growth rate of 6% for the next 30 years, that means coke will grow from .3% of all capital markets to .9% in that time. will cokes relative use/place in the world grow by 3x over the next 30 years? I dont think so.

I agree with all of the above, but I wasnt arguing that coke was the same as investing in the market, I was saying it cant grow by that much greater than the market over the next 30 years

I don't think I saw anyone say they will grow net income by 10%+. I think people said they could have a shareholder return of 10%ish.

Coke is very risky over 30 years..... any single stock is. We have no idea what people will be buying in 30 years and the easiest way to overcome this is to just buy the market.

what are thoughts on EZpawn? Instead of pointlessly arguing about coke or other large caps, this one seems to have nice upside, and seems cheap. I have one problem with it though, and that is regulation. I usually read every article first and try to collect some easy pointers of where to dig, so here goes from another article:

We think that not only has the market over reacted to these issues but they are transient in nature, creating a classic value play.

The business:

I can point you to the previous write-ups (or presentation below) to get a general flavor but as the company describes it they help consumers do 3 things

1) Sell . You have merchandise that you want to convert into cash. They will give you a bid on it. Lots of reality TV shows on the History channel if you want to get an idea of how pawn shops work. But generally they have only a few categories of merchandise. Jewelry, musical instruments, Tools, DVD/Video games, and TV’s and other common electronic equipment. The common theme, is through eBay and other channels all these items have a pretty predictable resale value. They bid 25-50% of that.

2) Buy. Like a classic market maker they let consumers buy merchandise they place into inventory from the above category. They also place inventory from forfeited collateral from loans (below)

3) Borrow: Everyone needs credit, especially low income folks. When you are thin file with no credit file your options are limited. EZ provides this demographics with options for unsecured credit, and secured credit by pledging their cars, and also items (Pawn Loans). These carry high fees, and high returns on capital, with relatively low risk. If folks default they repossess the collateral and move to monetize. Since they have conservative LTV ratios the rarely lose a lot of money in the aggregate.

They have grown quickly in the US by both acquisition and de novo growth. The industry is still highly fragmented with over 15,000 outlets. So plenty of consolidation opportunities in the US. But the company has been very smart and if you think the US is wild and virgin then wait until you get to Mexico where credit is even more limited. The company has moved into establishing a beach head in Canada and Mexico, and has acquired meaningful stakes of publically traded operators in the UK and Australia. They own 30% of the leading Pawn shop in the UK. All said and done now 20% of their business comes from outside of the US. The Mexican market alone offers even higher ROIC (30%) than the US, and we think has at least 10-15 years of unabated growth.

What we like:

-It is highly unlikely that banks and the formal financial sector will move into this territory. For one there is reputation and regulatory headaches they don’t want to deal with. Second, they don’t know how to effectively operate with this demographic.
-The industry is dominated by mom and pop shops/clusters in the US (and abroad). -Which make the value of a large professional platform stand-out. Tech, training, compliance all scale in this industry. The flip side is that as one of the few operators these guys are targets if the regulatory hammer comes down.
-High Returns on capital with trivial recourse leverage The Company has demonstrated 20% ish ROIC capability without levering the balance sheet. So little in terms of the kind of surprises we often see with ‘safe’ money center banks. We feel there is both margin of safety on the B/S and the high APR, secured loans they originate to customers.
-Room for capital structure improvement. With a 1B dollar company you can do things you can’t do as a small cluster of stores. They have done a securitization in Mexico for example that has lowered the borrowing rate from 19% to 11% in a few months and are renegotiated other loan facilities. These businesses have been traditionally equity funded but given the scale, some B/S optimization can go a long way.
-The management team has heavy retail, operational and PE backgrounds. We think they are disciplined on running and growing the business, but most important on capital deployment they are an ROIC driven shop. This discipline has led to consistently higher EPS over time, and they have on average outperformed the S&P 500 by a huge margin over the last decade.
-Interestingly we like the fact that the space will get more regulated. It will drive smaller players out (or into the arms of EZ and like operators). It will also clarify regulator expectations which we think will lead to higher multiples in the space (remove uncertainty), and we think regulators are smart enough to know they need this industry to survive since no one else is willing to provide credit to this demographic. You can’t simply cut them off. In fact we think regulators would put these guys on life support if they had to same as they did to the main street banks.

They are trading at net book value right now, but i think one would have to look more closely what exactly their book value is made off. I think the market is also overestimating their exposure to gold. Seems like the perfect recession stock, so they might get into trouble in a market where small businesses and people can more easily get loans from banks. Especially if they expand so much. And the regulation, seems like the market thinks this business will come into trouble from regulation and more easily available loans in the future, and i cant really get a grasp on how right or wrong the market is here :/.

Thoughts?

What do we think of Buffet dropping 525m into Suncor (oil sands in Canada)



pipeline coming?

I've kept meaning to buy suncor when it was sub $32. Disappointed to miss that

its 34 now? they still seem to be somewhat undervalued, unless im missing something here.

And anyone thoughts about EZpawn?