Coca-Cola Company (KO)

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.

You are really looking to emerging markets to grow. You have a great franchise, brand and business, but do you want to pay that much for a stock. It is something that will probably be stable and you will probably do well.

Thinks there is more potential with PepsiCo (PEP-N). Pepsi has the Frito-Lay division which is going to be a part that drives it. Pepsi seems to be coming over with more and better products. Population seems to be looking for a much better beverage that is much better for them.

Still a lot of money to be made. There are less people drinking carbonated soft drinks and that is why it is spending money to acquire a portion of Green Mountain and to try and get people to brew their own carbonated soft drinks at home. A great business that will continue on for many, many years. Generating an enormous amount of free cash flow. As they continue to retire shares and increase the dividend, people will wake up again to the stock.