Three of the 12 recessions after World War II lasted at least 12 months, and none outlasted 18 months. Over the previous 78 years, two expansions lasted a decade. Bank stocks are well-positioned to increase loan and lease portfolios over time.
Interest-rate sensitivity makes Bank of America a great investment. BofA's net interest income is the most vulnerable to monetary policy of any U.S. money-center bank. The Federal Reserve's most aggressive rate-hiking cycle in 40 years has given Bank of America a higher net interest yield and billions of dollars in quarterly net interest revenue.
Investors don't usually equate Bank of America with technology. In Q4 2023, 75% of consumer households banked online or via mobile app. Digital channels handled little under half of loan sales. Online and mobile app transactions cost banks a fraction of in-person transactions. BofA can consolidate branches and cut costs as digital usage rises.
Long-term value investors also like Bank of America's valuation. Shares cost approximately book value and are just around 10 times forward-year profits. favorably-run bank equities at or below book value have traditionally performed favorably for investors.
Coca-Cola Coca-Cola (NYSE: KO) is Warren Buffett's third top buy in February and likely for years to come. Every publicly listed corporation confronts challenges, including Coca-Cola. The main difficulty for this 138-year-old firm is above-average inflation. Coca-Cola's operating margin may suffer if labor, transportation, and ingredient expenses rise.
Coca-Cola has great pricing power, which is positive. Kantar's annual "Brand Footprint" study shows that Coke has been the most popular brand on retail shelves for 10 years (as of 2022). Price-wise, the corporation has outpaced inflation.
Its unmatched global variety is one of Coca-Cola's success secrets. It operates in all but three nations (North Korea, Cuba, and Russia) and has over two dozen brands with $1 billion in yearly sales. This implies it gets stable cash flow from mature countries and organic growth from faster-growing emerging regions.
The firm expects its addressable market to treble from $650 billion in 2017 to $1.3 trillion in 2022. Energy drinks and alcoholic ready-to-drink beverages can expand at high single-digit CAGRs through 2026, unlike effervescent soft drinks.
Don't disregard Coca-Cola's top-tier marketing. It spends more than half its advertising budget on digital media and uses AI to target younger audiences. However, its prior holiday tie-ins and famous brand ambassadors can reach adult customers. Coca-Cola is the most valuable consumer goods brand due to marketing.
Consumer staples stocks have dependable operational cash flow. Coke can transport anywhere since food and drinks are essential. Coca-Cola shares trade at 21 times forward-year earnings, a six-year low and slightly below its five-year average.
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