Bear markets are a normal part of investing and there's nothing you can really do about it. They help to clean out investment excesses that build up during bull markets. The best you can do if you are worried about a bear market is prepare, because one will eventually arrive. Which is why you might want to buy Coca-Cola (KO -0.75%) like there's no tomorrow.
What does Coca-Cola do?
From a big picture perspective, Coca-Cola is a consumer staples business. It sells relatively low-cost items that are purchased regularly regardless of the market or the economic environment. In the case of Coca-Cola, the key product is beverages, with liquid/water being a basic life necessity.
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That said, Coca-Cola isn't selling generic liquid products. It is built around premium beverages like soda, coffee, and energy drinks. But these are affordable luxuries that consumers don't really question even during hard times. Sure, they could just drink tap water. But for a small amount of cash, soda pop is a much more rewarding treat.
In the end, Coca-Cola is really a global brand manager. And given that its namesake brand is one of the most recognized brands in the world, it is fair to say the company is pretty good at what it does. In fact, it has the distribution, marketing, and R&D chops to stand toe-to-toe with any of its consumer staples peers, from food manufacturers to tobacco companies.
Add in Coca-Cola's size, at a nearly $300 billion market cap, and it is also large enough to act as an industry consolidator. That complements its R&D skills, as Coca-Cola can buy smaller peers with attractive products to broaden its brand portfolio and keep pace with emerging consumer trends. New products tend to grow rapidly just by being plugged into Coca-Cola's vast distribution network.
Coca-Cola is a great business, but why is it attractive now?
If you are worried about a bear market, Coca-Cola should be attractive to you. First off, consumer staples makers tend to hold up relatively well during market downturns. Essentially, investors go looking for safe haven investments and the resilient nature of the products Coca-Cola sells makes it a safe haven in a bear market.
Secondly, Coca-Cola is actually performing fairly well as a business right now. In the second quarter, organic sales grew 5%, which was more than twice as fast as the company's main rival, PepsiCo (PEP 0.35%). Essentially, you are buying a strongly performing business if you buy Coca-Cola.
Note that the company is a Dividend King, with over 60 years' worth of annual dividend increases behind it. It believes in reliably returning value to investors via dividend increases. The dividend yield, meanwhile, is well above the market at nearly 3%. Focusing on reliable dividends can help you survive a bear market without having to lose too much sleep.
The third reason to buy Coca-Cola like there's no tomorrow, however, is probably the most notable. Despite the good performance and the resilient business, Coca-Cola's stock appears reasonably valued. Its price-to-sales and price-to-earnings ratios are both close to or below their five-year averages. When you put all the pieces together, Coca-Cola looks like an attractive option if you are worried about a market swoon.
Not everyone will love Coca-Cola
The one caveat here is that Coca-Cola looks reasonably priced. It does not look cheap. So if you have a value bias you might want to keep looking (perhaps consider digging into PepsiCo). But for most long-term investors, Coca-Cola is still a very attractive option right now. In fact, that statement is true even if you don't expect a bear market!
