Coca-Cola Amatil Ltd (ASX:CCL) has outstayed its welcome in my family's portfolio.
The shares of Australia's and five neighbouring countries' Coca-Cola beverages first entered my family's portfolio back in February 2015, at $10.21 apiece.
Since then, Coca-Cola Amatil's share price has fallen around 15%, while the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has moved sideways.
While the return itself doesn't bother me, especially when we consider short-term share price movements don't tell us anything meaningful about the business, it's the longer-term outlook which has me more concerned.
When I bought Coca-Cola Amatil shares I expected they were slightly undervalued because the market was pricing in worse-than-expected results. I thought I was buying with a modest margin of safety. My thinking was much the same as my colleague Sean O'Neill's, which he detailed in this article.
Fast-forward more than a year and not much has changed with Coca-Cola Amatil.
The company's parent, The Coca-Cola Company, injected some much-needed funds into its Indonesian operations, in a bid to keep the Coca-Cola brand alive in an intensely competitive market.
More recently, CEO Alison Watkins reiterated the group's target of single-digit earnings per share growth.
Why it's time to sell Coca-Cola Amatil shares
When I look at my family's portfolio the first holding which jumps out to me as a poor investment is Coca-Cola Amatil.
If the company is cutting costs with the intention only to get back to earnings per share growth in the mid-single digits, it doesn't strike me as a market-beating investment. Sure, it could be — if it was a bargain. But it's not a bargain at today's prices. The consensus among analysts is around $9 per share.
On the flip side, if I'm wrong and the company rallies the day after I sell it (it wouldn't be the first time!), I'll miss out on some gains. But with more than 2,000 other stocks listed on the ASX, I'm almost certain one of them will offer a superior prospective risk-adjusted return.
