Coca-Cola Amatil Ltd (ASX: CCL) shareholders have had to remain patient over the last 12 months or so.
In that time, their shares have plunged from a high of $15.18 to a low of $9.00. They have since recovered marginally to sit at $9.48, which is still 38% below that high. The fall can be attributed to a fall in profits, thanks to a pricing war with rival Schweppes as well as pressures from supermarkets Woolworths Limited (ASX: WOW) and Coles, owned by Wesfarmers Ltd (ASX: WES).
Despite the recent pain, there are still plenty of reasons to like the stock. Before you contemplate selling your shares, consider these key points:
- Low price. Coca-Cola Amatil has not traded at these levels since 2009. Between then and now, investors would have done almost anything to have the opportunity to buy at such a low price.
- Wide moat. Coca-Cola Amatil's products are amongst the world's most popular brands. Investors like Warren Buffett refer to such competitive advantages as a "moat", and few companies can boast a wider moat than Coca-Cola.
- Temporary pains. The pricing war with Schweppes will not continue forever (after all, the lower prices are also hurting Schweppes!). The problems facing the business appear to be short-term based, leaving a long runway for improvements
- Long-term focus. Alison Watkins has warned there will be no quick fixes for the company. Not interested in short-term targets, she will instead focus on the long-term picture to ensure the best returns for shareholders.
- Conservative. Watkins has also suggested long-term profit growth targets may be closer to 5%. Although this is not as ambitious as her predecessor's targets, it is more achievable.
- Costs. As management restructures the business, analysts suggest the company could cut up to $100 million in costs.
- Alcohol business. The group re-entered the beer market late last year, which should prove very beneficial to overall earnings.
- Reorganised. The business will be reorganised and simplified to ensure greater productivity and efficiency.
- Bumper dividend. The stock offers a partially franked (75%) 5.3% dividend yield.
- Stronger portfolio. The company recognises it needs to strengthen itself outside of carbonated beverages which will see its position in the market strengthen.
