PepsiCo (PEP)

Pretty good year. People who like it think they should spin off their Frito Lay business. The volume growth for soft drinks has been anemic for year.

15% of a portfolio, so is trimming a good idea? Even though the soft drink market is really sluggish, this company has the benefit of having the Frito-Lay group which makes up about 25% of revenue and 40% of profit. Salty snacks are doing extremely well. 15% of a portfolio is getting a little rich in concentration. He would suggest that you halve this and buy something else that you think represents good value. Doesn’t have to be in the same area and it may be better not to be in the same area.

One of the things that saved this company is the fact that they had a food business. There is a push to split up the 2 businesses which might make the 2 businesses better. This company has also been very proactive on food and how it affects health issues.

Trading at 19X forward earnings but more diversified than Coca-Cola (KO-N). There is a view that a new CEO could come in sometime this year and may look at splitting up the company into the snack food business and the beverage company. This is not something he would advocate as it is a hypothetical situation.

Thinks there is more upside in this stock. Over a couple of years it really lagged the market. Very good management. Likes their snack business. Stock has had a big run so if you own, taking profits is more than acceptable at this level.

3 to 5 years. Sold at 80$ mark. It was getting extended against its growth rate. The diversification through salty snacks business gave helped. KO-N stumbled and is a one trick pony. Nothing else in the sector appeals to him. All are too expensive and growth rates are suffering.

Pepsi (PEP-N) versus Coca-Cola (KO-N)? He prefers this one because it has all the junk food as well. Likes the diversification. Coca-Cola has come off but this company has held up better because there is a US hedge fund manager that wants to split Pepsi up.

Has had a huge run since last December. It peaked out a couple of weeks ago and is starting to underperform market. Testing below 20 day moving average. Trend is upside but two of three indicators are negative. We are past seasonal strength to take some really good profits.

He has a model price of $64.97, a negative 23%. However, if you own, the wind is at your back in terms of these large cap US names. Feels that over the next 3 to 5 years, these large caps will do very well. If you own, he would be tempted to take profits and look elsewhere.

This was a beverage company that got into the restaurant and snack food business. It exited the restaurant business. Fortunately it is still in the snack food business because it is still a relatively poor 2^nd choice company to Coca-Cola (KO-N) in beverages but is the king in snack food businesses globally. Still attractive and relatively cheap.

Owns Coca-Cola (KO-N) instead because of its dividend growth and they always increase their dividends. This one has the snack business and trades at a slightly higher beta and is probably a little more international. Believes that Coke will grow its earnings faster. This one is fine.

One of the things that he likes about this company over others is their salty snack division. Frito-Lay is one of the biggest in that industry and makes up about 35% of their revenues and about half of their profits. Nice diversification away from just the pure drink business.

Has not been particularly pleased with the way the franchise has been managed. Had gone to this company because they had the salty snack business which is a growthier area.

This and Coca-Cola (KO-N) have very stable earnings streams and people love the product and don’t cut back on it. Both companies have been going into health areas. Most important part of the puzzle that drives stock returns are valuations. On this she is really not seeing much of a discount to where they have historically traded. Sees better opportunities elsewhere.

(Top Pick Nov 21/11, Up 11.91%)