Pepsi or Coke? This is a question that keeps being asked in the workplace, at school, in the restaurant or at kiosks. Going by Wall Street, the pecking order of the two leading soft drinks manufacturers is clear: Coca-Cola currently has a market capitalisation of just under USDbn 300, putting the Atlanta-based group some USDbn 100 ahead of its rival from the north-east of New York. Despite this discrepancy, the shares of both are among the members of the new Swissquote Monopoly Index, in which the online broker gathers together companies which operate in monopolistic or oligopolistic market structures. That means they profit from limited competition, enjoy considerable pricing power and are able to set trends. The combination of such shares creates a portfolio that is to be characterised by stability, consistent profitability and resilience across economic cycles.
When it comes to market power, Coca-Cola boasts some impressive figures. The industry giant’s brands account for 29% of the global market for non-alcoholic, ready-to-drink (NARTD) beverages. There are some 80 major suppliers, including Pepsi, who together enjoy a market share of 40%, while the remaining 31% is divided between more than 2,000 other producers. Around 2.2 billion Coca-Cola drinks are sold across the world every day. The soft drinks empire also includes the top brands Sprite and Fanta. Such a universal presence ensures stable growth and high profits. As a classic value stock, Coca-Cola slakes investors’ thirst for returns – one prominent shareholder is the avowed Coke fan, Warren Buffett – with reliable dividends. It has distributed profits without interruption for more than a century, and the dividend has risen constantly over the last 64 years.
Pepsi can look back on an impressive 53-year streak of dividend increases. Alongside beverages of the core brand and other well-known thirst-quenchers such as Lipton or 7UP, the group also leads the world in snacks. Fans of potato crisps will be more than familiar with Lay’s or Ruffles in Swiss supermarkets. The food sector is not the only one where monopolies and oligopolies can be found: there are many well-known top dogs across many different branches of industry. It is not uncommon for there to have been a clear hierarchy for a long time. That is true for commercial aircraft, for instance, where Airbus and Boeing dominate. Upheaval is never far away, though, with the semiconductor market being a good example. The former industry leader, Intel, has fallen behind in this sector, partly because it has missed out on technological trends. Meanwhile, Nvidia is enjoying a rapid ascent thanks to its considerable innovative capacity. The Californian company’s solutions are driving the AI mega-trend and have become an indispensable part of many applications. That enormous growth has also made Nvidia an absolute colossus on the stock market – the former graphics card specialist was the first company to hit a market capitalisation of USDtn 5.
Nvidia does not have an excessive weighting in the Swissquote Monopoly Index, currently accounting for 2.8% of this selection. In general, the index is broadly diversified. The Swissquote experts responsible for its composition have selected 29 market-leading companies from 11 different sectors. Investors can add the Swissquote Monopoly Index to their portfolio with a tracker certificate from Leonteq. The participation product is quoted on the SIX Swiss Exchange. The dividends of the companies included in the underlying are reinvested net in the index. The management fee comes to 0.40% p.a., and there is a calculation agent fee of 0.20% p.a. For this modest contribution investors have the opportunity to invest in a dynamic selection of intrinsically strong companies that play a leading role in their respective industries.
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