Coca-Cola Growth

Recently invested in Coca-Cola (KO) and I am happy with how it is growing recently. KO is the world's largest non-alcoholic beverage company, with the widest moats in the consumer beverage industry holding diversified brands and most importantly an EXTENSIVE distribution network. KO was trading at 52-week highs of $42.70 yesterday after reporting better than expected Q1, 2013 profits on 16th April. A net income of $1.75 Billion or $0.39/share. 

Worldwide sales volume grew at 4%, led by Coca-Cola brand (3%), Fanta (6%), Sprite (5%). Eurasia and Africa saw almost 15% growth while Latin America grew a solid 4%. I am convinced that we will see the most growth in these regions.

The management continues to set the five core strategic priorities as follows:

1. To grow sustainably and provide meaningful solutions that enhance the health and well-being of the communities they proudly serve
2. To win with Coca-Cola while actively promoting the brand and the category
3. To keep winning and executing with excellence at the point-of-sale
4. To keep maximizing the value of our global beverage portfolio
5. To encourage and inspire their system and associates to deliver on their mission

 I continue to like Coca-cola for its aggressive marketing and brand recognition, although i must say that it has been a while since i personally bought their products (switched to healthier options like green tea). Highly doubt they will stay away from non-carbonated/non-sugary drinks in the near future, perhaps they should acquire F&N. 

Disclaimer: I hold long position on Coca-cola (KO) and have no plans to execute any order within the next 72hrs. Would advise anyone to perform their own due diligence before investing at current prices, be patient for a decent pull-back before making a long-term investment decision.  

How much is ExxonMobil worth?

Came across this article on Seeking Alpha: How much is Exxon worth?

According to the author's stock analysis, ExxonMobil is now trading close to the lower boundary of its fair value range. His 5-year discounted-earnings-plus-book-value model estimates a fair value for Exxon Mobil between $86.53 to $124.18 per share. Current price of XOM is around $90. This means there is an upside potential of almost 37% to reach its fair value maximum.

Ok if you remember in my previous post on ExxonMobil, i estimated current value of XOM to be around $94. (which is based on technical analysis) I however would agree with the author that the true potential for XOM is $125 but only if the market sentiments remain bullish all year long. If we base it on long-term earnings growth expectations for an energy supplier such as Exxon, the stock is definitely undervalued. We need to have a proper timeframe for this new target to be reached. Remember, ExxonMobil benefits from its exposure to natural gas, even if the prices remain low in the near future.

Lets face the facts; the global economy is still recovering, energy demand will eventually rise, energy sector stocks should grow well over the next 2 years. But wait, we have had uneven, semi-exciting growth in the past 5 years since 2008, ALREADY. Some companies are still have low P/E values. We are nowhere near market tops. How long do you think the market will keep rising?  Thanks to the FED and BOJ, their Quantitative Easing efforts will probably prolong the market rise for a couple more years. Its very hard to say exactly how much higher XOM will keep rising, but based on fundamentals alone, XOM looks attractive even at this price. Look at the chart below, technically XOM is testing current resistance levels of $90.58.

Alot of IFs: If it breaks through 90.58 level, next stop is definitely $94, which also happens to be my target for profit taking. If however, its not able to break through to next level within by end of April, i will not be surprised to see it drop to below $90 and tade between the parallel channel down throughout May-August.   

*Disclaimer: I have a small position in ExxonMobil (XOM) and right now I am adopting a “hold and see” attitude. However I have no plans to initiate any positions within the next 72 hrs and highly recommend you do your own research to determine your own suitable entry and exit positions.

Few tips To Investment Planning

Investing requires discipline and I cannot stress enough the need to stick to certain set of rules. Lets look at a couple of rules I have agreed to before I began investing. Rule Number 1: Make use of Compounding Compounding is vital to grow your investments over time and anybody can do it as long as you stick to the following principles. In order to compound successfully, you need perseverance, knowledge of how it works and most importantly TIME. One should have the understanding of how compounding actually works so that he/she can stick to a savings and investment plan. I put TIME in bold because unfortunately this is no get-rich-quick scheme, compounding works only through time. But there is a catch, you MUST keep your investment money aside, that means no spending it. Although it may be boring, for people with itchy fingers want to move money around to riskier investment vehicles, just endure until such time as to when you really need the money. It should get a little more interesting after 8 to 10 years of continuous, uninterrupted compounding. Let us look at a typical example i picked out from the internet, you can just google "power of compounding" and get so many examples.  But here's one from ICMARC website:  http://www.icmarc.com/Images/investments/COTW/20080328startsavingearly.gif For someone who starts contributing (annually $4k) into his retirement plan 10 years earlier can expect to compound at least twice the amount if he were to start contributing at a later time. Another study done by Market Logic in US, shows how compounding magic can happen even if you stop contributing on a yearly basis. Let us assume investor (B) opening a retirement fund at age 19. For 7 consecutive years, he contributes $2000  at an average growth rate of 10% (7% + interest). Then he stops putting anymore money into his retirement fund. A second investor (A) makes no contributions until the age of 26 (same age at which investor B stops contributing to his retirement fund) but investor A starts to diligently contribute $2000 annually until he is 65 years old. (assuming the same 10% growth rate. Look at the incredible results in the table below. Investor B ends up with higher return on investment (ROI) than A but he only contributed for 7 years (total: $14,000). Investor B on the other hand kept contributing $2000/year for 40 years. (total of 2000x40 = $80,000). The only difference being that B has had 7 more early years of compounding than A which were worth more than all of investor A's 33 additional contributions.

* If you are below the age of 25 and reading this, i urge you to go and start investing little by little in your own choice of blue-chip stocks. Its not too late for your kids too, I suggest starting early for your kids. It's a study which i wish i discovered earlier because i had a "poor dad" using the definition by Robert Kiyosaki in his popular book "Rich Dad, Poor Dad". Unfortunately my father did not feel that his kids needed to learn about money, he only taught us to save, get a good job and save some more. Having a saving plan running concurrently with your investment plan is very important too, but as a rule, i never keep more than 8 months living expenses in my bank account. Rule Number 2: Try Not to Lose Money This may sound funny to some but i think we should have the mentality of not losing money unnecessarily. If we want to preserve our capital and eventually grow it, we must aim not to lose big money. I have noticed that most people do end up losing money through gambling, ridiculous investment schemes, poorly executed business deals, greed and often times poor market timing. Over the years, there have been so many cases in Singapore where people lost money in the stock market, options, futures, in terrible loans, mindless gambling and in their own business. This rule may be simple, but we have to be disciplined in the way we spend our money and perform due dilligence enterning into any kind of investment. Rule Number 3: It takes Money to make Money  The wealthy investor has a major advantage over the smalltime amateur investor, they have the MONEY. One can argue that actually the wealthy investor does not need the market, somehow the market always moves in their favour. Understand the wealthy investor's mindset, he already has all the income he needs, not depending on the investment outcome, removing all emotions out of the equation. He probabaly has money invested in BONDS, Treasury-bills, Money market funds, Stocks, Real Estate and Other Business shareholdings. The wealthy investor is an expert is seeing VALUE. For example, he would invest in Bonds when its cheap and yields are high or move his money to Stocks when they are cheap with higher yields. With the ultimate goal of acquiring REAL ASSETS, eventually these investors buy real estate, physical gold, jewellery, expensive watches, diamonds and artwork; Things with great value. Another thing is when there is no opportunity presenting itself, they can afford to wait. We need to have patience. What about the little guy with little or no money? They feel pressurised to make money, or SAVE, SAVE, SAVE into a bank. This is madness at current interest rates less than 1%, being offered by banks. When the small investor is not buying overvalued stocks offerting 1-2% yields, he is off to gamble away his hard earned savings like buying lottery tickets or some ridiculous get-rich quick scheme. The small investor is always trying to force the market to do something for him, he is a guaranteed loser. Without understanding VALUES, he constantly overpays swayed by his/her emotions. I like this statement which i found on the internet : "He who understands interest - earns it. He who doesn't understand interest - pays it". The poor guy usually end up in huge debts, making payments on his house, electronic equipments (Thanks to COURTS easy installment plans), loses money gambling...in short always runs after money. So why is it that life is unfair, wealthy people always have the upper hand? I thought the poor always maintain a strict discipline of never overspending. Instead of taking his extra savings and compounding it in smart income producing securities, we always see them in debt. The usual answer is "I'm not making enough money". Although I symphathise on this situation, I know its possible to take two jobs, upgrade your skills, lower your monthly expenditure, do whatever it takes to work towards financial freedom. Be Positive. It makes alot of difference, both in one's mental attitude and in the way one actually handles one's money. Rule Number 4: Investment Value Usually I will suggest that one should stick to the basic compounding system and let it work over time. But if the opportunity arises when the market offer great value, Take it! [like post Dot.Com bubble (2001), Post-Subprime crisis (2008)] I would judge an investment to be of great value if it presents Lower Risk, Attractive Return(yield), Capital Appreciation. The key to making money is definitely to stay liquid, move your money from one market to another, follow the basic rule of buying undervalued investments.