Institutional Ownership Dominates Coca-Cola’s Stake, Caution Advised Due to ‘Crowded Trades’
In the realm of Coca-Cola Company (NYSE:) ownership, institutional investors hold a significant sway, encompassing 62% of the company’s shares. Notably, the top 25 shareholders control 46% of this sizable stake. While retail and individual investors often interpret such substantial institutional investments as positive signals, it’s important to exercise caution due to the potential risks associated with ‘crowded trades.’
The ‘crowded trade’ risk emerges when multiple institutions hold a significant stake in a stock, which can potentially trigger a sell-off in adverse market conditions. This risk is particularly pertinent for companies that lack a solid historical growth trajectory. While Coca-Cola’s earnings and revenue records appear credible, it’s advisable to approach reliance on institutional validation with prudence.
Berkshire Hathaway Inc. (NYSE:) stands out as the largest shareholder of Coca-Cola, commanding a substantial 9.3% stake. Public companies and the general public own 9.3% and 28% of the shares, respectively, with the former potentially maintaining a strategic interest. Notably, the top 25 shareholders collectively hold less than half of the total shares, indicating a lack of majority interest.
Hedge funds do not have significant investments in Coca-Cola, and insiders possess less than 1% of the company’s shares. Nevertheless, this modest percentage translates to a considerable value of US$1.6 billion worth of shares, making their trading activities influential in terms of value.
The substantial institutional ownership in Coca-Cola adds credibility to the company but also introduces the inherent risk of ‘crowded trades.’ The trajectory of the company’s future will be shaped by analyst sentiments, its historical earnings and revenue performance, and any existing warning signals.
Insights from InvestingPro
The Coca-Cola Company has long been a core holding in many investment portfolios, and for good reason. According to InvestingPro, Coca-Cola boasts a perfect Piotroski Score of 9, reflecting a robust financial position, and it offers an attractive return on invested capital. These factors serve as strong indicators of the company’s financial health.
Coca-Cola has consistently rewarded its shareholders by raising its dividend for an impressive 53 consecutive years. This unwavering commitment to dividend growth can provide reassurance to investors seeking stability and consistent returns.
InvestingPro’s real-time data further underscores Coca-Cola’s financial stability. With a market capitalization of $245.31 billion and a P/E ratio of 22.88, the company enjoys a solid footing in the market. In the last twelve months leading up to Q3 2023, Coca-Cola generated $45.03 billion in revenue, growing at a commendable rate of 6.35%. This growth, coupled with a gross profit margin of 59.14%, underscores the company’s capacity to generate and retain wealth.
For more in-depth insights and real-time data metrics related to Coca-Cola, InvestingPro offers a comprehensive resource for investors to assess the company’s financial well-being and performance.
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