Keurig Dr Pepper (KDP)

Should Canadians sell their shares prior to the merger's completion, because this could be a tax problem? He endured a tax headache with another merger. If you don't plan to hold the takeover company (in the merger), then sell. Dr. Pepper is paying a dividend and giving a share of the new company. He sold his shares, not wanting this deal.

(A Top Pick March 28/16. Up 6%.) Recently made a big acquisition of Buy which manufactures antioxidant drinks and other healthy drinks. They are trying to get away from the sodas. It was an expensive acquisition. He likes their distribution network. They have thousands of trucks to deliver their products to stores across North America, and are able to take on other brands for other companies, getting a royalty. A big dividend raiser every year. This is still a Buy.

(A Top Pick July 10/15. Up 22.89%.) The carbonated beverage industry is not growing because of all the focus on healthier lifestyles. This company has aggressively been expanding in emerging markets. The highest soda consumption in the world is in Latin America, which is where they have been primarily gearing their focus. Doesn’t expect the same store growth in the next year.

Branded soft drinks. One of the misunderstood things is that it is not just soft drinks, it is Snapple and juices and its distribution network. For a new drink to get coverage in convenience stores, they have to be on Coke, Pepsi or this company’s distribution network. A potential for growth going forward is Latin America, where they have some wonderful brands as well as water. Lots of free cash flow which they generously return to shareholders in the form of dividend increases and share buybacks. Dividend yield of 2.37%.

The carbonated beverage industry is not one that is growing globally; in fact it is shrinking by about 8% a year. The unique aspect of this one is that they are targeting Latin America. Right now about 90% of their revenue comes from the US, so they are going into Latin America as their growth engine, and are stealing market share from Pepsico (PEP-N) and Coca-Cola (KO-N). Latin America has the largest soda consumption per capita globally.

They have effectively used their capital structure well and increased free cash flow. His issues are that the whole sugary drink area is under pressure as it is adding to the diabetes problem and a lot of the cost structure taken out has finished and so you need them to grow the top line. They are getting a lot of price competition from Coke and Pepsi. They are not as international as the other two so there is some room for growth there. He would suggest, however that it is time to get out.

He likes this. They own more than Snapple. They also own Crush, Canada Dry and A&W Root Beer. High margin business with gross margins around 60%.. Their focus has been gaining market share in Mexico, which is the highest soda consumption per capita globally. In North America, they have been moving towards the consumer preference of healthier lifestyle and diet, and have introduced their 10 Platform, a lower calorie soft drink. It trades around 20 times, whereas Pepsi and Coke are closer to 30 times. However this is not a growing industry.

Had a pretty strong move this year. It looks like it is trying to test the trend line. If you were to draw a 200 day moving average, you will usually find that it will keep a certain distance off the trend. If it gets too high, 10% or more over that average, you will typically see it return to the trend line. He thinks that is all that is happening on the stock and it is not in danger, but you could see it pull back a bit more.

Okay but doesn’t hit his criteria. He screens a number of things before considering a stock. He wants payout ratio to be low and free cash flow to be consistent over time. They have stumbled a few times. He wants debt to equity to be under control and he wants them to have the ability to grow their business at a rate that is higher than regular growth rates might be. He prefers J. M. Smucker (SJM-N) which would be a good Buy at its current price.