Coca-Cola Amatil Ltd (ASX: CCL) shares sank to a new five-year low today, declining 2.5% to just $8.85. The fall comes as part of a broad sell-off of Australian equities which has seen the benchmark S&P/ASX 200 (INDEXASX: XJO) plummet more than 5% since the beginning of the month.
Coca-Cola Amatil's shares have now dropped 42.6% since trading as high as $15.43 in March 2013. The drop is thanks to retail pricing pressures, rising costs and inflationary pressures in Indonesia. Over the last 12 months, shares have traded in a range of $8.96 to a high of $13.05.
Given how heavily the stock has fallen, it is understandable why investors would be so hesitant to pick up a stake in the company. After all, it recorded a 15.6% drop in net profit for 1H14 and the business itself has admitted that the near-term isn't looking any brighter.
However, Coca-Cola Amatil is a good bet for investors who are willing to remain patient and don't necessarily mind a little bit of short-term volatility. Not only does the company have the rights to manufacture and distribute some of the greatest brands in the world, it also has a management team focused on improving the business going forward.
A strategic review has been implemented which should see costs cut considerably (possibly up to $100 million annually), while more attention will also be directed towards marketing and product development.
I bought shares when they were trading at $9.39. Although I would prefer to see them trading higher than that now, I am content with the direction of the company and am willing to accept short-term declines for potentially fantastic long-term returns.
