Thursday, November 15, 2012

Slumping Soft Drinks Coca Cola KO & Hansen Natural HANS

If there was an alternative/ energy drink etf this might present a good opportunity for some returns. But for a "know something investor" why buy into an etf when you can pick the best individual companies in it? As John Maynard Keynes said, "to carry ones eggs in a great number of baskets without having time or opportunity to discover how many have holes in the bottom is the surest way of increasing risk and loss."

"Beverage Digest reported that the total sales volume of soft drinks in the United States fell 0.6 percent in 2006, following a 0.2 percent decline in 2005. The industry sold 10.16 billion cases of soft drinks in 2006, down from 10.22 billion in 2005("The carbonated soft drink industry has moved from roughly 3 percent growth in the 1990s to modest declines in the last two years," Beverage Digest reported, saying the estimate included energy drinks, a very fast-growing segment."

I see Coca-Cola KO with the largest market share in softdrinks and a flat share price over the last 10 years and Pepsi PEP not a true drink play as it is the largest producer of salty snacks. I wonder if these types of companies are going to grow as fast as these new energy, coffee, healthy drink companies are? Supposedly people are looking for healthier and more invigorating drinks and foods for that matter, so one should find these companies and see if there is any hidden value. If the others are valued the same as Hansen Natural Corp. (HANS) then it may not be strikingly obvious. Hansen sports huge multiples but has great returns on equity with little to no debt. Hansen has had its time and this all could be just a fad. I haven't found any other independent companies but they are probably the same. Valuation isn't easy and is far from precise because you can't see into the future. Was Google overvalued at $150? It looked like it to me then. The big guys will probably have the only leading energy drinks next to RedBull in a few years because they're big and they can. Capitalism at its essence.


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