Coca-Cola FEMSA (KOF) – “Defensive Play for Election Volatility”
Coca-Cola FEMSA (NYSE: KOF) looks like a solid defensive buy for investors looking to hedge against the upcoming election volatility. Shares of the Mexico-based Coke bottler were recently upgraded to a buy rating, with Goldman Sachs setting a new 12-month price target of $113.70, a notable increase from its previous target of $108.30. With shares currently trading around $84.24, this implies a potential upside of 35%.
The stock is still down 2% this year, presenting what analysts see as an attractive entry point. Coca-Cola FEMSA’s demand is expected to remain resilient due to the inelastic nature of soft drink consumption in Mexico, meaning price changes are unlikely to significantly impact demand. The company has seen positive low-single-digit volume growth, with pricing power that has generally outpaced inflation.
Goldman Sachs also highlights growth opportunities in other regions, particularly Brazil. Coca-Cola FEMSA is investing heavily in expanding its network, with 25 new production lines expected to be added by 2025. Meanwhile, costs in Mexico are expected to moderate in the low single digits, while prices are set to rise in the mid-single digits in the second half of 2024.
Given the stock’s defensive nature, exposure to less discretionary industries, and strong pricing power, Coca-Cola FEMSA is well-positioned to navigate potential market volatility stemming from the Mexican presidential transition and the upcoming U.S. election. For investors looking for a steady, resilient performer in uncertain times, Coca-Cola FEMSA is a stock worth considering.
