Sterling Investment Management

Coca-Cola HBC AG

Coca-Cola HBC AG, a Switzerland-based bottler of Coca-Cola products. It has the exclusive rights to manufacture and sell Coca-Cola products in Austria, Cyprus, Greece, Italy, Northern Ireland, the Republic of Ireland and Switzerland. The countries it supplies in developing markets include Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia while under the emerging markets, the countries covered are Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, Macedonia, Moldova, Montenegro, Nigeria, Romania, Russian Federation, Serbia and Ukraine.

Our core strategy is: buying great companies. Buying good companies is great but not good enough. History has taught us that if we want good outcomes (read positive returns) the purchase price must also have a margin of safety.

Unfortunately (and often) great companies trade at high valuations i.e. a £10 currency note trades at £20. The note may be crisp and new but we refuse to pay more based on the “hope” that we will find a greater fool. Hope is not our strategy and never will be.

Putin’s attack on Ukraine would affect Coca Cola sales in the country and the company has also withdrawn from Russia. The market did not like this and when the price was weak we had our chance to buy at an attractive entry point. As long-term investors we are very happy to buy a first-class company at a fair valuation and hold for the long term – fully aware about the short-term negatives (which are widely known and, in the price). As the wise have said: Be greedy when everyone is fearful. We have the mindset do so.

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