PepsiCo (PEP)

Very well-managed. They're not a straight beverage company like Coke. Pepsi has Frito-Lay, which is not healthy, but amounts to 50% of the company's profits. Pepsi has marketed F-L well. Pepsi is defensive and has sold off less than the current pullback.

Not enough growth here and he barely invests in consumer staples. A well-run company though. If you want dividend growth, look at the banks or utilities instead.

Has been struggling. Their core product was carbonated soft drinks, for which demand has been shrinking. They have diversified away from that. Over 50% of their revenues now come from other types of products. However, he prefers Coke to Pepsi. Coke and Pepsi have similar yield.

There is a lot of pressure on carbonated beverages. It’s shrinking year-over-year. This has transitioned away better than Coca-Cola (KO-N) has. More than 50% of revenues comes from non-carbonated beverages. They have over 20 brands that generate over $1 billion a year. He would consider this if it were cheaper. Trading at over 20X Price to Earnings.

(Market Call Minute.) A well-managed company. About half their business comes from Frito-Lay salty snacks. This is one you might want to look at after the yield curve inverts.

The PepsiCo (PEP-N) Coca-Cola (KO-N) Rivalry never seems to end. Of the 2, he would prefer PepsiCo, but doesn't own either. It has done a better job of diversifying away from the reliance on carbonated soft drinks. Today, more than 50% of their revenues come from noncarbonated drinks. There is still a lot of uncertainty as to what this kind of business looks like 5 years from now. He would not be a buyer at this time.

Within this overall space, there is no rush to buy the name. The carbonated soft drink industry is not growing. Trading at 23X, which is not cheap. About 50% of revenue is coming from noncarbonated soft drinks.

This has been a very positive stock story over the years, but it is far too expensive in a failing space. Carbonated sodas and salty snacks are certainly not growth areas anymore. Management has done a good job in managing the space, but at 23X earnings he wouldn’t dip his toe in the water.