1. Coca Cola Co.
Finacial resource
A Potent Triple Stock Play As Coca-Cola Flexes
Its Financial Muscle
Long before Coca-Cola Co. (KO) accelerated its growth strategy this year, many on Wall Street
regarded the world’s largest soft-drink company as a sleepy slow-growth giant. But when the
global icon recently acquired significant equity stakes in coffee company Keurig Green
Mountain (GMCR) and energy-drink producer Monster Beverage (MNST), investor interest in
Coke suddenly perked up.
Not only had Coca-Cola’s acquisitions recaptured investor attention but also highlighted the
investment attributes of both Keurig and Monster Beverage. Coke acquired an equity stake of
16% in Keurig, a leading provider of single-serve coffee brewers, and a 17% interest in Monster
Beverage (formerly Hansen Natural Corp.), a major producer of “alternative” beverages, such as
Monster Energy and ready-to-drink dairy and coffee drinks.
Shares of Coca-Cola popped up to $40 a share when the deal became public in May.
But the new vibrant Coca-Cola play necessarily transmits a similarly positive outlook for Keurig
and Monster Beverage, whose stocks are now entwined with Coke and are very likely also
destined to continue moving to even higher levels. Already, their shares have rocketed because
of their recent partnership with Coke. Keurig has zoomed to a 52-week high of $128 a share in
June from $95 in May. It closed on Aug. 19, 2014, at $117, but analysts see the stock going even
higher. Akshay S. Jagdale, analyst at KeyBanc Capital Markets, who rates Keurig a buy, has a
12-month price target of $150 a share, based not only on the Coke deal but on the company’s
second-quarter results that delivered solid sales and earnings that beat analysts’ forecasts.
And similarly, Monster Beverage is expected to expand Coca-Cola’s markets in the U.S. and
overseas. Coca-Cola will take on some of Monster’s distribution relationships, and the two
companies will cooperate with each other in pursuing international expansion plans. “We are
impressed with Monster’s performance and are confident in Monster’s ability to perform over
the long-term,” said Muhtar Kent, Coca-Cola’s CEO and chairman.