We recently published a list of Couch Potato Stock Portfolio: 7 Best Stocks To Invest In. In this article, we are going to take a look at where The Coca-Cola Company (NYSE:KO) stands against other best stocks to invest in from Couch Potato portfolio.
Couch Potato investing is the concept of having a portfolio of assets that operate almost entirely on autopilot. This portfolio is intended to withstand shifting market circumstances without needing investors to make major modifications to their asset allocation or objectives. In 1991, Scott Burns came up with the idea, seeking to construct the simplest investment strategy possible: a 50/50 combination of equities and bonds using only two funds. Burns claims that this makes it possibly the most accessible portfolio available, stating that anyone who “can divide by 2” can understand it.
Barclays calculated the weighted average returns of hedge fund portfolios by investor type, which ranged from 10% to 11%. Based on performance, a conventional 60/40 portfolio model would have comfortably outperformed these gains. According to the Lazy Portfolio ETF, a 60% stock/40% bond strategy incorporating the Vanguard Total Stock Market ETF and the Total Bond Market Index Fund would have returned little less than 15% in 2024. Even after 5 years, including 2022, when both stocks and bonds fell in value, the 60/40 method has an average return of 8%. In essence, couch potato investing is a more conservative version of the 60/40 method. More importantly, its dependability shines through in difficult circumstances. For example, between 2000 and 2002, the S&P 500 sank 43.1%, whereas the couch potato portfolio declined just 6.3%.
Unsurprisingly, one possible downside of the couch potato portfolio is that it tends to underperform during notable market upswings. Portfolios with a larger allocation to equities can better capitalize on bullish markets, resulting in higher returns than the more conservative couch potato strategy. This disparity is especially prominent when the proportion of shares in a portfolio exceeds the couch potato approach’s balanced 50/50 mix of stocks and bonds. However, Burns recommends that investors evaluate this strategy comprehensively.
“Your 35-year portfolio, for instance, was worth $884,481 at the end of 2021 and declined $155,601 during 2022. That’s a loss greater than the original $100,000 value.
But so what? The portfolio is way larger than expected or needed.
The good news here is that the historical evidence shows, once again, that we can get through some pretty hard times if we keep our investments simple and cheap.”
Our Methodology
Although couch potato investing discourages individual stock trading in favor of index investment, we chose to examine the Vanguard Total Stock Market ETF and identified some of its best holdings for this list. These equities were then filtered down further based on many parameters, including the hedge fund sentiment around them, a history of stable dividend payments, and well-established businesses.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A row of factory workers assembling bottles of sparkling soft drinks on a conveyor belt.
The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 81
The Coca-Cola Company (NYSE:KO) is a multinational beverage company that sells in over 200 countries. The corporation manufactures, develops, and distributes a wide range of nonalcoholic beverages, and has progressed far beyond soda and pop. Coca-Cola’s brands include Fanta, Fresca, Schweppes, Sprite, and others.
In Q4 2024, the company recorded revenues of $11.5 billion, a 6.5% increase over the previous year. Organic revenue also increased by 14%, thanks to a 9% jump in price/mix and a 5% increase in concentrate sales. In addition, The Coca-Cola Company (NYSE:KO) generated decent cash flow, with $2.9 billion in operations and $1.6 billion in free cash flow. It also maintained a respectable adjusted operating margin of 30.7%, indicating strong profitability.
On February 26, Erste Group analysts raised Coca-Cola (NYSE:KO) from Hold to Buy, highlighting the beverage giant’s strong profitability and positive future prospects. The company expects organic sales growth of 5% to 6% year-over-year, building on its strong market position. This predicted rise is due in part to the launch of new goods, such as probiotic lemonades, which are expected to drive sales growth throughout the year.
Overall, KO ranks 7th on our list of best stocks to invest in from Couch Potato portfolio. While we acknowledge the potential of KO as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.