Value Investing: The Story of Coca-Cola
Disclaimer: Your capital is at risk. This is not investment advice.
My Journey in Finance;
Having covered momentum in the last series, I now look to value. It is a subject that becomes increasingly important with experience because it is the only strategy that lasts the test of time. I will outline value through the lens of the Coca-Cola (KO) share price since the 1960s.
Value investing seeks out situations that are trading below their intrinsic value. For the corporate raider, that could be valuable assets such as property, securities, plant and machinery, or even intellectual property. More often, it is an upbeat view of the company’s growth prospects, using reasonable assumptions. Value might also be found in a bond with a more attractive yield or a commodity trading below a level it might reasonably be expected to. Provided the value investor does the research and has the skills and patience, they routinely make money, albeit with the occasional hiccup.
Value is a robust investment strategy. It may not get all the glory, like high growth stocks, but if well-implemented, it is a reliable source of market-beating returns that can be generated in a wide range of market conditions. Buying something that is undervalued is a basic and sound investment principle, one that should never be ignored. By the same line of reasoning, any investment that is not expected to deliver value should be avoided.
