Times are certainly tough for shareholders of embattled beverage distributor Coca-Cola Amatil Ltd (ASX: CCL).
It really has been the ultimate test of patience. The shares have plunged more than 40% since hitting a high of $15.18 in May last year, while in the same time, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has edged forward 4.2%. Last week alone they gave up 31c or 3.3%, dropping to a low of $9.01 before recovering slightly to end the week at $9.10.
And there could be more pain in store. One large investor sold $270 million worth of the company's shares after the market closed on Thursday, indicating they're not so confident of Coca-Cola Amatil's future.
The headwinds facing the business are certainly strong. A pricing war with Schweppes is still raging while pressures are also coming from supermarket giants Woolworths Limited (ASX: WOW) and Wesfarmers Ltd's (ASX: WES) Coles business. To make matters worse, doubts have emerged over its growth potential in Indonesia and there are fears of changing consumer health trends and tastes which impacts the certainty of Coca-Cola Amatil's future.
Despite these issues however (or, perhaps, because of them), I believe Coca-Cola Amatil is an excellent buy today. While the rest of the market is focused on the uncertainty and problems facing the business, I am holding firm and believe these problems will be limited to the short term rather than the long haul.
After all, the company's brands are amongst the strongest in the world and a strategic review being implemented by Alison Watkins, the group's new Managing Director, should see productivity and efficiency significantly improve over the long term. For instance, some estimates suggest that $100 million in costs could be removed, which would improve margins while new products will also be introduced to help boost market share.
While shareholders are going to have to remain patient for some time yet, they can enjoy the benefits of the company's trailing 5.6% dividend yield in the meantime.
An even better bet than Coca-Cola Amatil
I took advantage of Coca-Cola's low price at $9.39 and, although my investment is thus far sitting in the red, I'm strongly considering increasing my stake. However, there is another stock I also own which I am even more bullish on…
