Coke's Pop, Weber's Buyout, Stock Market Superstitions

Coca-Cola's Q3 profits and revenue surpassed expectations, leading the company to raise full-year guidance. With two-thirds of their revenue and operating profit coming from outside of North America, Coca-Cola's global presence allows them to capitalize on strengths and mitigate weaknesses. The quarter saw organic revenue growth of 16% and unit case growth of 4%, but gross margin was negatively impacted by 190 basis points due to currency headwinds and inflationary concerns. The strong quarter results reflect Coca-Cola's pricing power and execution abilities, making it a global behemoth worth following. To enhance communication skills and gain insights from experts, listeners are encouraged to check out the Think Fast, Talk Smart podcast.

Despite facing inflation challenges, Coca-Cola's strong business model and healthy demand continue to drive growth. The company raised full-year guidance, expecting organic revenue growth of 14-15% and earnings per share growth of 15-16%. Coca-Cola's ability to absorb gross margin hits and exercise pricing power sets it apart as a mature, defensive play in a challenging economic climate. The company's diversification across various lines, geographies, and its strong brand position it well for long-term success. While earnings season may bring discussions about currency headwinds and the strong dollar, Coca-Cola's resilience and stability make it an attractive choice for investors seeking income and portfolio diversification.

Defensive stocks, like Coca-Cola, can provide stability during market downturns, as they tend to perform better than the overall market. This was evident in 2022 when the stock market was down 20%, but Coca-Cola remained flat, outperforming the market by 20 percentage points. This provides comfort and confidence for investors to hold onto growth stocks that may need more time to perform or are facing challenges. Another notable development was Amazon adding Venmo as a payment option at checkout, benefiting PayPal significantly. With Venmo's growing user base of around 90 million active accounts and projected total payment volume of $250 billion this year, this partnership presents a significant opportunity for PayPal to boost payment volume and attract younger shoppers who have grown up using Venmo. Lastly, Medpace Holdings saw a 36% increase in stock price following a strong earnings report. Jim Gillies had previously mentioned Medpace Holdings as a stock to watch, and his recommendation proved to be a profitable one for those who listened.

Weber Grill's shares have seen a 33% surge due to BDT Capital Partners' acquisition offer, but the company's short public life and reliance on long-lasting products like grills have made it a challenging investment. Despite efforts to expand into areas like ecommerce and meal kits, the business faced weakened expectations due to macroeconomic conditions and withdrawn guidance. The acquisition may focus on strategic imperatives like new growth products, subscriptions, and operational efficiency to get the business back on track. However, maximizing efficiencies and cutting costs may be key to reviving the company, as consumers don't buy new grills frequently. The company's IPO in 2020 raised less than expected, and earlier revenue growth projections were withdrawn, leaving investors uncertain about the financial future.

While the stock market may appear rational with its terminals, charts, and algorithms, it also holds a certain level of superstition. For instance, the belief that October is an unlucky month for the stock market, with the phrase "sell in May and go away" being a popular one. Historically, October has seen significant market volatility with some of the worst one-day drops for the Dow occurring in this month. However, it's not the worst-performing month. When examining historical returns by month, the months between May and October tend to have lower likelihoods of market gains and lower average returns, except for July, which has the highest average return. Despite the irrationality of these beliefs, they gain validity when enough people act on them, potentially influencing market trends. So, while the stock market may be influenced by rational factors like supply and demand, it's essential to acknowledge the role of superstitions in shaping market behavior.

While certain months and lunar phases have historically shown different market trends, their predictive power is not definitive and should not be the sole basis for investment decisions. September, for instance, has a higher probability of negative returns, but it's not consistent enough to be a reliable trading strategy. October, on the other hand, has historically bottomed in bear markets, making it an interesting month, but it's not a guaranteed trend. The lunar market theory suggests that the period around the new moon may yield better returns, but its validity is debated and not universally accepted. Ultimately, a well-diversified portfolio and a solid understanding of market trends and fundamentals are essential for successful long-term investing.

The Super Bowl Indicator, a football-market correlation theory, suggests that the stock market performs differently based on which conference wins the Super Bowl. The theory, originated by sports journalist Leonard Coppett in 1978, states that a win by a team from the original NFL results in a bull market, while a win by a team from the original AFL leads to a bear market. However, with the merger of the NFL and AFL in 1970, this correlation has become less reliable. The indicator had a perfect success rate in the late 70s but has since had a success rate of 75%. The most recent win by an NFC team, the Tampa Bay Buccaneers in 2021, resulted in a strong market performance. However, the current market downturn, despite the Rams' NFC victory earlier this year, may indicate another losing streak for the Super Bowl Indicator. Coppett himself might have mixed feelings about the indicator's accuracy given its inconsistent performance.

Investors and portfolio managers have held onto various superstitions throughout history, despite having no basis in fact or logic. Two such superstitions discussed were the "Coppett's Sixpence" and the "Maiden in the Volcano." Coppett's Sixpence, as told by Jason Zweig's interview with Harry Coppett, was a satire on the fallacy of linking a single game's outcome to the stock market's performance. The Maiden in the Volcano, as described by Josh Brown, refers to the belief that selling a position during market turmoil can appease the market gods and prevent further losses. Although these beliefs may provide comfort in uncertain times, they are not backed by evidence and can lead to irrational decision-making. Another common superstition, the "Man in the Box," refers to the fear that buying or selling a stock will cause the market to move against you. This superstition, while not based in reality, is likely fueled by the human tendency to anthropomorphize the market. Lastly, the "Presidential Election Cycle Theory" suggests that the stock market performs best during the third year of a president's term, but this theory, while having some historical data to support it, is not a guaranteed truth and should not be relied upon as a sole investment strategy. In essence, it's important to remember that markets are driven by complex factors and not by superstitions or random events.

While the fourth year of a presidency has had some challenging economic periods, such as in 2000 and 2008, historically, the stock market has still made money during the first two years. However, investors might be more cautious during these early years as presidents typically focus on policy priorities during their first term and may prioritize the economy during their second term to secure reelection. Despite the potential for market volatility during the first two years, it's important to remember that long-term investing is a reliable strategy. In fact, the stock market has posted positive returns following every midterm election since World War 2. Despite the potential dangers of investing during certain months, including October, it's crucial for long-term investors to stay the course. As Mark Twain famously said, "October is one of the peculiarly dangerous months to speculate in stocks." However, instead of trying to time the market, it's better to hold onto stocks through all market conditions and focus on bottom-up investing. If you have any personal finance-related questions, send them to podcast@fool.com, and we might answer them on a future episode of the show. And remember, The Motley Fool may have formal recommendations for or against the stocks discussed on the program. Always do your own research before making investment decisions.