Why was there a sharp sudden drop in price for Coca Cola in Aug 2012 from $81 to $37? The price is averaging around $44. Is it a good stock to buy? Thanks? - Seedly
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Anonymous

Asked on 15 May 2019

Why was there a sharp sudden drop in price for Coca Cola in Aug 2012 from $81 to $37? The price is averaging around $44. Is it a good stock to buy? Thanks?

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Rais M
Rais M
Level 7. Grand Master
Answered on 25 Feb 2020

Coca Cola (KO) is a defensively stock. I bought it prior to Aug 2012 and the reason why I bought it is because Warren Buffett owns it. I know it is a silly reason but it helps kickstart my portfolio.

The 'huge drop' is due to 2 to 1 share split. Some financial websites are misleading as they show the 'huge drop' whereas, I believe there are also some other websites that also include such splits prior to Aug 2012 so that we can track the share prices better.

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Billy Ko
Billy Ko
Level 7. Grand Master
Answered on 21 May 2019

The reason for the stock price is due to a 2-for-1 stock split by the company - https://www.cnbc.com/id/48134915

It is considerably a defensive stock given how it falls under consumer staples. That being said, it's Gross Profit has been decreasing over the years. Fortunately, cost control has been good with the company lowering it's expenses more than the decrease in profit, hence net income is still considerably stable.

Coke's margins are to the left whereas industry average is to the right. Coke can be seen performing significantly better than its peers in the industry.

The latest Q4 results seems rather gloomy with revenue falling 4%. leading to the stock falling by $4+ (~8%)

https://www.cnbc.com/2019/02/14/coca-cola-earnings-q4-2018.html

But if you see the advertising and publicity of coke - through ads + campaigns + Warren Buffett during his AGM (and how he owns this stock also).

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