After learning from my worst investment decision, I'm developing a list of companies that I will be watching over the next six months. I hope to find 18-20 companies that would make great additions to my -- or anyone's -- portfolio, and eventually pare the list down to 8-12 companies. You can see my first choice here.

Along the same line of thinking as my first choice, Waste Management, I have found another company with a fairly sustainable moat. Coca-Cola (NYSE: KO) has made a business of selling sugary, nonalcoholic beverage concentrates for more than 125 years. Luckily for us, it's really good at what it does, and its stock performance over the years has borne this out, beating the returns of both the DJIA (INDEX: ^DJI) and S&P 500 (INDEX: ^SPX) over the past 10 years.


Sell that sugar water!
Coke knows what it is good at, focusing primarily on the sweet drinks that generations have grown up drinking. Contrast this with leading competitor PepsiCo (NYSE: PEP), whose Frito-Lay and other assorted food items sidetrack it a bit from the business of peddling sugar water to the masses.

Thirsty patrons in more than 200 countries collectively consume 1.6 billion of Coca-Cola's drinks per day. As expected, nearly 70% of its 2010 revenue came from outside the United States. Its three fastest-growing business segments outside of North America -- Eurasia and Africa, Latin America, and the Pacific -- accounted for 34% of total revenue, and almost 49% of revenue outside of the United States.

That is not to say Coke is struggling in the U.S. Revenue in the U.S. grew 33% from 2009 to 2010, outpacing all other segments of the company. This owed to the acquisition of the North American bottling operations of Coca-Cola Enterprises

Coke produces the top two soda brands in the U.S., and four of the top 10. While PepsiCo also has four brands in the top 10, my highly unscientific average rating has Coke clocking in with a 4.75 average rank, with Pepsi at 5.5, and third-place Dr Pepper Snapple (NYSE: DPS) bringing up the rear at 7.

Rising costs looming?
With the 2010 acquisition of Coca-Cola Enterprises' North American bottling operations, Coke's pension expense has increased from $176 million to an estimated $240 million for 2011. Rising pension costs across the country have plagued many businesses, including the U.S. Postal Service. While this expense could be viewed as pocket change for a company as large as Coke, profitability suffers whenever expenses increase. Throw in its assumption of $7.9 billion of CCE's debt, and Coke now faces higher interest costs. However, in the long run Coke expects the acquisition of CCE to pay dividends for the company in the form of lower bottling costs.

Distribute, acquire, repeat
One positive of the CCE acquisition was the assumption of a distribution deal with Dr Pepper Snapple. Previously, CCE distributed Dr Pepper Snapple's brands in North America. Coca-Cola also will include Dr Pepper and Diet Dr Pepper in its fountain dispensers in certain outlets throughout the U.S. This agreement spans the next 20 years, placing two more top 10 soda brands alongside Coke's offerings.

Other opportunities for growth could be found in the acquisition of smaller brands. Coca-Cola has an extensive history of acquiring other beverage makers: It purchased Minute Maid in 1960, Barq's Root Beer in 1995, Odwalla fruit juice in 2001, and Fuze Beverage in 2007. Its attempts to buy out Chinese juice maker Huiyuan Juice Group were thwarted by the Chinese government on fears that it would give Coke a juice monopoly in China.

Another avenue for growth could lie in energy drinks, currently a small part of Coca-Cola's product stable. It sells its own energy drinks under the Full Throttle and NOS brands, but trails leaders Red Bull, Hansen Natural's (Nasdaq: HANS) Monster, Rockstar, and PepsiCo's AMP Energy.

It really isn't healthy
Like any company that makes its money peddling unhealthy products, Coke may face future slowdowns from the growing health-consciousness of this country and others. The company also acknowledges potential problems caused by scarcity or poor quality of water, its main ingredient.

Meanwhile, SodaStream International (Nasdaq: SODA) targets those who want to make their own soda pop at home. SodaStream deserves some respect, but will probably never replace people's taste for their favorite soda brand.

What do you think?
I didn't even talk about how Coca-Cola is an outstanding dividend stock, but I like the company for more than its yield. It lives up to its ticker and KO's the competition. That's why I am adding it to My Watchlist to keep an eye on the company over the next few months. I encourage you to do the same. Are there other companies you think I should keep my eye on? Let me know in the comments below.