Jim Cramer of CNBC suggested on Thursday that investors should increase their holdings of Coca-Cola stock.
“Coca-Cola has been one of the most reliable winners so far in a very bad year for the stock market. When the first quarter’s inflation was out of control, these individuals were already putting up impressive numbers “said he.
“Now that so many of their major expenses have significantly decreased from their peak levels. I believe Coke’s performance will only gradually improve “Added he.
The host of “Mad Money” listed four reasons why he thinks investors should buy Coke stock. First of all, he claimed, the business is recession-proof because people will continue to drink pop regardless of the state of the economy.
He added that the company “exactly fits the type of company we like here, one that makes real stuff, turns a profit, and returns those profits to shareholders via dividends and a buyback and also has a reasonable valuation compared to its historical pricing.”
In addition, he noted that Coke will profit from the ongoing recovery of the economy because those who stayed home during the pandemic are eating out and requesting Coke products to accompany their meals.
The company’s foray into alcoholic beverages, according to Cramer, will strengthen its balance sheet. In order to produce a canned Jack-and-Coke cocktail, Coke announced a partnership with Jack Daniel’s distiller Brown-Forman in June. With Molson Coors Beverage, the company has already introduced Topo Chico Hard Seltzer and Simply Spiked Lemonade.
But according to Cramer, the company’s apparent ability to combat inflation is the main factor making Coke stock appealing.
In the first quarter, Coke’s earnings and revenue exceeded Wall Street expectations, but the price of important inputs like aluminum, high-fructose corn syrup, and plastic increased.
However, according to Cramer, the price of corn has decreased by about 27% from its April highs, with the last three weeks seeing the biggest drop. Aluminum prices have decreased by about 41% since reaching their peak in March, he added.
He admitted that the strong dollar is still a challenge for the multinational beverage company.
“It implies that their earnings from abroad result in less money in US dollars. Although undesirable, Wall Street finds it much simpler to ignore currency fluctuations than the severe inflation of raw cost, “said he.
