A cross-border battle with some pop
Mexican-produced Coca-Cola may taste sweeter than its American counterpart, but which is the better stock?
By Bill Gunderson
At the supermarket here in San Diego, there is now a cooler full of sleek, old-style bottles filled with Mexican Coca-Cola.
I like the Mexican version a lot better than the American version. There is just something about an ice-cold glass bottle. In addition, the Mexican Coke uses a less-refined sugar than American Coke, and this makes for a sweeter, bolder taste.
Drinking a Mexican Coke is like going back 40 to 50 years when the American version came in similar bottles and one needed a bottle opener to pop the lid. That was back when American Coca-Cola's (KO) stock was an aggressive growth stock and the Mexican version, Fomento Economico Mexicano SAB de CV (FMX), did not exist.
Since then, Coca-Cola has matured and growth has slowed down considerably for this Dow Jones Industrial Average ($INDU) member. The Atlanta company is now a $169 billion firm, while the Mexican version is just $35 billion.
While I like the taste of Mexico-produced Coca-Cola better than American Coca-Cola, which is the better stock?
Let's begin with the performance of the two stocks over the years:
As you can see, it is virtually no contest. Or should I say no concurso? The Mexican middle-weight has it all over the American heavyweight. Compare the one-, two-, five-, and 10-year performance of these two stocks. $10,000 would have grown to almost $95,000 in pesos in FMX, while the American version delivered a much flatter $21,790.
I know, you have all heard the expression: "past performance is no guarantee of future results," but those are some significant numbers. If I am an odds maker on this battle, based on performance the favorite would seem clear.
But what about valuation? I don't like to buy stocks based on performance only. I like all three legs of the stool to be in place: performance, value and a good stock chart. How does the valuation weigh-in stack up?
Fomento's shares are a bit more expensive than its U. S. counterpart, but then investors have to pay up a bit for superior growth. Fomento's income is expected to grow by 14.3% per year over the next five years while Coke is looking at just 8.2% growth. In fact, the PEG ratio is much more favorable on the Mexican middle-weight contender.
While the food and beverage sector is not exactly one of the top-ranked sectors in the market right now, I like the fact that Fomento also owns convenience stores. This gives it exposure to the more highly rated consumer and retail sectors.
Lastly, let's compare the charts of the two stocks:
I prefer to buy stocks in uptrends. Even though I have owned FMX for a while, I would have no problem buying this stock today.
In fact, when I compare Fomento against the other 3,185 stocks that I follow, it comes in at number 34. Not bad for a large-cap.
I think I will pop open an icy cold Mexican Coca-Cola and ponder the fiscal cliff.
At the time of publication the author had a position in FMX.
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Mexican Coke is allowed to put sugar in and taste more like "Original" "real" coke. US Coca-Cola cannot use "real cane" sugar and uses high frutcose since becoming "new Coke" then changing back to "original formula", but they changed the sweetning base at that time. Mexican Coke is more the real thing!
I drink the Mexican Coke because of taste but Pepsi and Mountain Dew had "throwback" drinks and they tasted like the old times.
Is Pepsi and Mountain Dew still selling the "throwback" drinks?
Target did carry them.
What ever happened to returnable bottles? people harp on this new green thing, re-using bottles was more green than recycling plastic.
Bring back re-usable glass bottles !!!!
I tried posting twice our Opinion of Coke...Old Coke was best..
Pepsi "throwback", yes still sold..
If we lived close to Mexico, we would be buying it.
New Coke sucked then changing back, the recipe changed too...
The sugar thing was explained earlier...too expensive because of subsidies.
We bought or saved an 8 pack of 16 oz bottles from before they changed to "new coke".
Drank one years ago celebrating, still got the other 7 and one empty in the 8 pk carton.
You know how they say don't drink the water in Mexico? Well the same holds true for their bottled soft drinks. I've had this glass bottled in Mexico version of Coke and thought it tasted great but.... a few hours later I had major regerets.
i dont care what you all are saying i live in detroit mi (large # of hispanics,) and so am i , the little bottles go flat before i can finish it .the carbonation should last ,i think its dated for freshness,and by the time it gets to mi its flat..that being said united states all the way baby.................................
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