Coca-Cola (NYSE:KO) stock has been it with investors of late. The question is, can the bullish behavior in KO stock last? Let’s take a look at what’s happening off and on the price chart to draw a more informed decision and look at a better way to manage position exposure.
Wall Street has been very sweet on Coca-Cola the past couple months. And it’s not as though the iconic brand and one of the market’s more legendary investments wasn’t already doing well. It was. But shares have seen an almost caffeine-like boost of about 13% since the end of May. That’s certainly a nice return in any market. But to add some perspective, over the same period the Dow Jones Industrial Average is up approximately 5%. While that gain is decent, it’s less than half of KO’s. Further, the market barometer has also shed 5% from last month’s all-time-highs. So, what gives?
For starters, everyone likes a good defensive play during more turbulent times. And with today’s inverted yield curve and the U.S.-China trade war continuing to threaten the global economy –investing in a more defensive business like KO stock, which also pays a dividend of nearly 3%, invariably becomes more attractive to investors. But there’s more to today’s Coke too.
Growth is back for KO stock. The last couple of quarters have shown strong international sales growth from Coke’s water and juice products. The most recent earnings report in early July also marked the seventh straight quarter of double-digit growth from its signature Coca-Cola Zero Sugar soda beverage. That’s still not everything KO is offering today’s investors.
Nearly 25% of Coca-Cola’s total sales are the result of new products or reformulated beverages. That’s up nearly 70% from revenues of just 15% two years ago. Lastly, with Coke’s solid quarterly results paired with upwardly revised sales guidance of 5% organic growth, KO stock remains it, but even more so and for good reason.
KO Stock’s Monthly Price Chart
KO stock has been in as clean of an orderly uptrend as you’ll find in the market when looking at the monthly chart over the past decade. Now that bullish determination has seen a more aggressive buyer enter the picture.
Over the past three months shares have managed to successfully break above KO stock’s long-standing channel resistance line. When will this cycle of more bubbly enthusiasm end? It’s impossible to answer that question. But with market conditions at its back and reasonably, a stronger cycle of growth for Coca-Cola, I wouldn’t bet against KO. In fact, I’d suggest buying shares today.
The bottom line is that with Coca-Cola trading just narrowly above its July high and confirming five straight months of higher highs and higher lows, KO stock remains a friendly trend worth investing in. Still, to ensure your Coke purchase remains fresh-looking without fearing a technical reprisal, I’d recommend a blended 5% stop loss for exiting in order to keep a lid on losses and the powder dry for future opportunities.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.