PepsiCo (PEP)

It reports Tuesday. The weight-loss drugs make it hard for PEP to thrive. It pays a 3.6% dividend, though.

GLP weight-loss drugs have hurt, and in some countries like India PEP has faced headwinds over their use of water, which is scarce is those places. 

A great consumer staples company. It's smart that they got into the snacks business, like Frito Lay. But it's a slow-growing, low-margin business. Pays a good dividend, but the valuation doesn't attract him, 15-20% too high.

Before they reported early yesterday, several analysts were downgrading it, based on lowering organic growth forecasts, concerns over Frito-Lay, weakness in North America, and others. Results: 1.3% revenue growth vs. 2.7% expected, and -2% food and beverage sales volume. No surprise, so shares actually closed higher by the end of the day. Highlights of Q3: Gatorade gained market share, and core operating expanded 90 basis points despite more spending on ads. Pepsi reiterated full-year earnings growth of 8%. They will add more automation to cut costs and add healthier snacks. The street expected a bad quarter, so it sold off, but the quarter wasn't that bad.

The boring name in his portfolio. Yield is 3.1%, very secure, will grow around 6% over time. Very steady name, moving higher. With interest rates starting to fall, low-beta names like this will become more attractive. Paying 21x forward PE for 8% growth rate, not too bad. For the conservative part of your equity portfolio. 80% of shares are institutionally owned, so the smart money's in this stock.

It has been a great company for the past 40 years. There has been a consumer revolt on price increases. The growth rate is flat to down in the short term.

Great company. Smart to expand into snacks, unlike KO, gives diversification. Executes very well. Issue is valuation, 25+ PE range. As a value investor, not interested. Not sure the Ozempic craze is a threat, need to see ramifications.

OK, doesn't love it. Earnings were light in some sectors, but showed some resilience overall. Range-bound, kicking its way up. Consumer weaker right now, so he doesn't like consumer discretionary as much. Strong brand recognition, one of the better names in the space.

It reports Friday. Shares have been in a rut even though business is pretty good. He thinks people are worried about the impact of the hit weight-loss drugs.

Consumer products are facing pressure around the world. Don't sell just for tax reasons. Instead, ask yourself is the original thesis for why you wanted to own a stock still valid? If not, let it go. What you choose to buy instead is a separate decision.

We would be a bit agnostic on a name like PEP. It is large and stable and grows at mid-single digits but also trades at 20X forward earnings and should have tough comparable numbers over the next year, coming off of inflation pass through benefits. We think it would be fine for a 'steady eddie' type of name over the long term but also not something that excites us a whole lot.
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The valuation has always been too high, and its growth is slow.