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Is It Time to Invest in the Coca-Cola Portfolio?    

As investors get more nervous about the U.S. trade war with China, defensive plays such as Coca-Cola (NYSE:) have become more popular. Up 27% (including dividends) over the past year through August 30, KO stock continues to generate significant attention from investors.

Source: Fotazdymak / Shutterstock.com

Before you buy Coca-Cola stock and throw it in a drawer, you might also want to consider investing in the entire Coca-Cola portfolio. Here’s why.

The Sum of the Parts

Coca-Cola’s equity method investments generated in revenue in 2018, along with $7.5 billion in operating income. 

Coca-Cola’s major equity method investments 19% of Coca-Cola European Partners (NYSE:CCEP), 19% of Monster Beverage (NASDAQ:), 20% of AC Bebidas, Arca Continental’s (OTCMKTS:) beverage business, 28% of Coca-Cola Femsa (NYSE:KOF), 23% of Coca-Cola HBC (OTCMKTS:), and 18% of Coca-Cola Bottlers Japan (OTCMKTS:CCOJY).    

Coca-Cola currently trades at times sales. Assuming its equity method investments were one entity and also sold at 7.1 times sales, they would have a market cap of $536 billion, or more than double Coca-Cola’s entire valuation. 

Not mentioned in the six equity method investments from above is Coca-Cola Consolidated (NASDAQ:), the largest Coca-Cola bottler in the U.S. Coca-Cola owns of its stock. 

Here’s the market cap valuation of all seven equity method investments (Source: and Wall Street Journal):

Company Market Cap Coca-Cola’s Interest Coca-Cola European Partners $26.0B $5.0B Monster Beverage $31.6B $6.1B AC Bebidas  N/A N/A Coca-Cola Femsa $12.3B $3.4B Coca-Cola HBC $11.0B $2.5B Coca-Cola Bottlers Japan $3.9B $702.0M Coca-Cola Consolidated $3.2B $1.1B

The only holding that I wasn’t able to come up with an approximate valuation is AC Bebidas. That’s because it’s an 80% –owned subsidiary of Arca Continental, which has other interests in addition to its beverage business. 

That said, the company’s beverage business accounted for 89% of its 2018 revenue. So, let’s assume its valuation is 89% of its $9.2 billion market cap, which means Coke’s 20% interest is worth approximately $1.6 billion. 

In total, the seven equity method investments are worth approximately $20.4 billion, $1 billion higher than the carrying value of $19.4 billion, which doesn’t include minority investments in BodyArmor and its other growth ventures. 

KO Stock Performance vs. Equity Investments

As I said in the beginning, Coca-Cola stock has generated a total return of 27% over the past year, 193 basis points better than the U.S. total market. 

How have the other stocks performed?(Source: Morningstar 1-Year returns)

Company 1-Year Total Return Coca-Cola European Partners 34.5% Monster Beverage -3.7% AC Bebidas  -17.4%* Coca-Cola Femsa 0.6% Coca-Cola HBC 5.5% Coca-Cola Bottlers Japan -26.9% Coca-Cola Consolidated 99.1%

You’ll notice an asterisk beside AC Bebidas’s total return. That’s because I used its parent, Arca Continental’s one-year return, and that’s based on its performance on the Pink Sheets. Its performance on the Mexico Bolsa was -17.6%, so it’s reasonably accurate. 

The performance of the seven stocks was either good — COKE up 99.1% — or bad — CCOJY was down 26.9%. 

Overall, based on a $1,000 investment for all seven stocks, they generated a total return of 13.1%, about half Coca-Cola’s total return over the past year.

The Bottom Line on KO Stock

While some of the seven Coca-Cola equity investments have done poorly over the past year — Monster would be at the top of the list of disappointments — I wouldn’t bet against some of them rebounding over the next 6-12 months. 

    That being said, it’s a heck of a lot easier to make a single investment in KO stock, stick it in a drawer, and enjoy a steady stream of dividends and capital appreciation over the next 3-5 years or longer.  

    At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

    The post appeared first on InvestorPlace.

    The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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