Isdell may be the best man for the job

　　Described as "charismatic," Isdell may be the best man for the job, but it is still too early to see what he can do at this stage to revitalize the brand. Under the leadership of the Babbitt Bearing Manufacturers trio of Goizueta, Keough, and Ivester in the 1980s and much of the 1990s, the shares of Coca-Cola were a must-have and Coca-Cola was regarded as a growth stock. Please also keep in mind, however, that the run of KO during that time also occurred in the midst of the greatest bull market in U.S. stock market history. Again, readers should recall that I have always contended that we are still in a secular bear market ? a bear market not unsimilar to the 1966 to 1974 secular bear market.

While indices such as the Dow Industrials, Transports, the S&P 400 and S&P 600 have recovered nicely since the cyclical bear market bottom in October 2002, large caps such as Coca-Cola, Microsoft, or even GE have never really covered, and it is my belief that large caps will continue to underperform once the bear reasserts itself sometime this year. The dividend yield of 2.6% may or may not help, but who would want to hold a "value stock" once the Fed Funds rate is greater than its dividend yield (as of right now, the Fed Funds rate is 2.5%)? I really do not see deep value here. While a P/E of 20 is at the low end of its five-year range, it is interesting to note that Warren Buffett started buying his shares of Coca-Cola in 1988 when the P/E was only 13 (with a market cap of less than $15 billion) and analysts at the time were proclaiming the stock to be expensive!

S&P currently projects a fair value of Coca-Cola at $46, so there is really not a great margin of safety here. While I believe Coca-Cola is a very strong brand and should be a part of every investor's long-term core holdings, I do not believe it is a good time to buy at this point. The growth in the stock price of KO was neither due to luck nor coincidence ? it was due to Goizueta's shrewd management of the stock price, Keough's salesmanship of the company, and Ivester's financial genius along with a roaring bull market more than anything else. Despite the lack of leadership in Coca-Cola during the last seven years, part of the old dream of KO being a growth stock has still hung on for far too long.

For KO to be an attractive stock once again, this author will need to see a more compelling valuation, such as a stock price of $25 to $30 a share. At some point, however, I believe KO may be a glamour stock once again (as it still has a lot of potential in China and India where only a total of about 850 million cases of Coke finished products were shipped in 2004, compared to 20 billion cases for the entire world), but not until some of the weak hands have been shaken out from the stock. Please let us know your thoughts and opinions. Is KO a buy, hold or sell?