Because I am an even fatter man trapped in a somewhat fat man’s body, I used to drink quite a bit of Coke. Mostly I’d drink Coke Zero, because for some reason I thought it would make a difference. I was wrong.

I still drink a bit of the brown fizzy liquid, but I’ve cut down my consumption quite a bit. These days, I generally only drink the stuff when I’m out at a restaurant, or at a party, or whatever. (Ed. note: like you’d ever get invited to a party) I’m still consuming a few cans of the stuff a week, but I’m down probably 50% from my peak.

There are tons of people like me out there. As our population gets older, we’re starting to make smarter decisions with food. You could certainly make the argument that it’s all too little too late, but the trend is evident. Soda sales have been falling in North America for about a decade, which have only been mitigated by increasing sales in water and juices. Both Coke and Pepsi are still growing a bit, buoyed by developing world sales and chips, respectively. (WHOO CHIPS)

Kind of related: that time I talked about a fat tax on bad food.

Book value isn’t an accurate way to value a company like Coke, since such a large part of the business is intangible. How exactly do you value Coke’s good name and the emotional reaction invoked whenever someone cracks open a bottle of the stuff? You can’t, so it’s best not to bother. Besides, it’s a mature business with a huge following from retail investors, meaning it’ll likely never fall to the point where it entices contrarian investors. Hell, Coke only fell 25% during the New Coke fiasco of the 1980s. There are too many dividend growth investors waiting on the sidelines, too happy to buy the name after a 10% correction.

Coke is one of those stocks that will neither make you rich nor make you poor. It’ll chug along, growing revenues from 1-4% every year, and grow earnings a little more because they’ll cut costs and buy back shares. The dividend will continue to grow 5% a year. Dividend growth investors will tout it as awesome, and certain people will get out of the name as global interest rates increase and they can get 6 or 7 percent on a decent corporate bond.

And call me crazy, but I think buying any stock at within 10% of its all-time high is stupid. Nobody can argue that such a stock is a value stock. Coke trades at more than 20 times earnings with profit growth that would be nonexistent if not for share buybacks.

But there’s one more reason why you shouldn’t buy Coke. I’ll let Wintergreen Advisors take it from here, who own 2.8 million shares:

Wintergreen Advisers, LLC, on behalf of its clients, expresses its deep disappointment with Coca-Cola’s proposed 2014 Equity Plan. As further detailed in the attached letters to the Coca-Cola board of directors and Berkshire Hathaway CEO Warren Buffett, Wintergreen Advisers believes this plan to be an unnecessarily large transfer of wealth from Coca-Cola’s shareholders to members of the Company’s management team.


We can find no reasonable basis for gifting management 14.2% of the share capital of Coca-Cola, worth $24 billion at today’s share price. No matter how well a management team performs, it is unfathomable that they would require such astronomical sums of money to provide motivation.

In 2013, Coke issued $1.3 billion in stock based compensation. The company bought back $4.8 billion in stock. On the surface, it doesn’t seem so bad. But it doesn’t mention the fact that Coke’s executives are some of the highest paid in the business. The company could get away with issuing half that amount of stock options and still generously reward management.

Besides, like I mentioned, the share buybacks are the only reason profit is growing in the first place. So management is being compensated to grow profits, which it does by using profits to buy back shares. It then issues more shares to management, slowing profit growth by doing so. Coke would be better off just to pay the managers out.

Personally, I won’t touch a company with excessive management compensation. If someone is complaining about it, chances are it’s excessive. Add management greed as another reason to avoid Coke’s shares.

Tell everyone, yo!