Coca-Cola Company (KO)

Short? He doesn’t short individual stocks. This is trading at 21X forward earnings with the 10 year average of about 17X. A bit pricier at this point, especially with its growth rate. Also, their revenues are 60% from outside of the US. There would be some headwinds if the US$ continues to move higher. Doesn’t particularly like the name at this point. 3% dividend is pretty safe.

If you buy shares in companies that keep growing earnings then you will make money. He thinks they will be selling more of their product in 10 years. He prefers Doctor Pepper/Snapple because it is smaller. It is a potential take-over candidate.

Trading at a pretty high valuation. 19.5X forward earnings, but more important its 6.5% growth rate is pretty weak. 55% of revenues are coming from outside of North America.

This has been range bound longer than the S&P has. Because of this, you treat it accordingly and buy it when it is in the $39 area and sell somewhere around the mid-$40.

(Market Call Minute.) There are better companies to buy within the consumer space. However, they are participating in the growth in emerging markets.

Really hasn’t been a great performer for a long, long period of time. The problem is that they are selling sugar water, and people are drinking less and less of that. They make $.005 a can, and that is getting more and more challenging. They got in the water business in a big way, which is turning out to be a bit of a problem with more and more municipalities pushing back against bottled water.

There are worse places to be than in this. Growth has slowed and there are not a lot of margins going forward, but they continue to increase the dividend and buy back shares, and probably 10 years from now it will be double from where it is today. 3.2% dividend yield.

A global company with strong brands. Has cash and pays a relatively decent dividend. It is very well positioned in emerging markets, so not a lot of room to expand. Also, the category they are in is declining in developed markets.

Pepsi (PEP-N) or Coke (KO-N)? Year-over-year carbonated beverage sales are down about 9%, which doesn’t bode well for either name. To combat that they have diversified away by making acquisitions. This one has been going into tea companies, coconut water and even coffee. His preference is Dr Pepper Snapple (DPS-N) which has Canada Dry, Crush, A & W Root Beer. This has very little market share outside of North America and their more specific target is into Mexico, the highest soda consumption capital globally. They are gaining traction there.

This is a lower growth type of name. What concerns him is that they are 55% dependent on international revenues. With the soaring US$, that will certainly act as a headwind towards revenues and earnings.

PepsiCo (PEP-N) or Coke (KO-N)? PepsiCo would be the best. The International side is smaller on soft drinks, but that is a growth area. Also, Pepsi has diversification through their Frito-Lay side. Also, likes their diversification away from soft drinks.

Thinks growth is really being compromised. Look at what Pepsi’s strategy has been in terms of diversification and adding product. The core market of Coca-Cola has really slowed down. They haven’t diversified enough into other product growth areas to upset that slowdown. Multiple is still relatively high.

A very slow grower. He doesn’t like the space that much as he thinks it will become very competitive. What you are hoping for on this one is big international growth, because domestic consumption patterns aren’t very good. Recent press reports on aspartame and aspirin, etc. won’t help the stock. Thinks the dividend is fine.

Not a fan because it has so much tied into its core Coke soft drink brand and people are moving away from it. Prefers PEP-N who bought Frito Lay and Quaker for diversification.

Exposure in Africa is very tiny, and that is a huge, growing market. People are not drinking as much carbonated soft drinks, but this company is getting into other kinds of drinks. They are huge in water and energy drinks. He prefers Dr Pepper Snapple Group (DPS-N) where the valuation is cheaper with the possibility of being acquired by a larger company.