Joined Jan 1, 1970
509 Blog Posts

Da, Da, Da Pepsi Pepsi

Aquafina, Dole Juices, Gatorade, Lipton Iced Tea, Mountain Dew, Doritos, Lays, Quaker, Fritos, Tostitos, Mug Root Beer, Pepsi, Diet Pepsi, and Pepsi (in it’s 7 other flavors), Propel Water, Sierra Mist, SoBe Life Water, Starbucks Frappacino, Tropicana….these are some of the brand names owned by Pepsico [[PEP]] that occupy shelf space at your local Wal-Mart, supermarket, grocery and convenience stores.

After visiting with “Mike”, a 35-year veteran with Pepsi in soft-drink distribution, I came away from our meeting impressed by the company and the brand name.

For one thing, PEP is aggressively expanding into high growth international markets like Argentina, Brazil, China, Mexico, Russia and India with ads like this….

[youtube:http://www.youtube.com/watch?v=LCUZ_MZECaQ 450 300]

….and this….

[youtube:http://www.youtube.com/watch?v=SVgbwQXhCx0 450 300]

Make sense? Didn’t think so.

PEP is, however, maintaining it’s focus on healthier products, mainly the non-carbonated soft drink (CSD) products like bottled water, fruit juices and energy drinks . In recent years, the industry has seen a marked shift away from CSD’s.

Bottom line, [[PEP]], currently at $67.51 is a potential BUY with a 12-month target price of $85. Keep the stock on your watchlist and use the recent pullback in the shares as a potential buying opportunity down the road. I wouldn’t buy it just yet though, as evidenced by excess supply in the stock, shown as a double bottom breakdown on the PnF chart. The bullish support line at 62 would be a better entry.


PEP recently reported strong first-quarter results, from solid growth in international operations and the PepsiCo Americas Foods segment.First-quarter net sales increased 13.4% to $8.3 billion, reflecting volume growth of 4%, and revenue growth across all segments.EPS estimates could come in around $3.74 for 2008 and $4.22 for 2009.

PEP currently pays an annual dividend of $1.50 per share, which is about a 2.2% yield. Dividend estimates are $1.74 for 2008 and $2.14 for 2009.

PEP has raised its commodity inflation guidance by 300 basis points from 6% to 9%, factoring in the increased input costs grain, cooking oil and energy. However, the company has maintained its 2008 earnings guidance, as it expects to offset these commodity cost increases through pricing and productivity initiatives. Thecompany has some forward purchases/hedges in place through the balance of 2008, and will take additional price hikes to help offset the cost increases.

One thing that Mike had indicated was that the CSD market was a much tougher market now with a lot less pricing power. It remains to be seen whether the market will accept price increases. The productivity initiatives would included charging distributors higher fees for less productive routes and vending machines.

PepsiCo’s beverage segment has been hurt by the slowdown in consumer spending in the U.S. However, most of the weakness in the beverage category has come from the foodservice industry, where Pepsi has limited exposure.

International growth is what looks most promising and that is where the company is focusing financial and human capital.

The Latin America Foods segment reported strong growth in the first quarter. Excluding M&A and currency effects, volumes increased 5% year-over-year, with revenue up 11% and operating
profit up 15%. Both Sabritas and Gamesa delivered strong volume growth, while operating profit benefited from price hikes and strong revenue. The Brazilian operations experienced capacity
constraints in the first quarter due to a fire at one facility. The company is in the process of restructuring its Brazilian operations, and believes it will benefit from the integration of the Lucky snack business.


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Pepsi (PEP)

Today I’m visiting with a recently retired executive with Pepsi. I’ll post an update and analysis of the company later this weekend.


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Expanding the Horizon Using ETFs

Ever feel like you’re spinning your wheels trying to figure out this market? Trading in a funk lately? Consider expanding your search and look at opportunities on a macro scale.

I’ve done a little research on using ETFs to get more exposure globally. After all, the U.S. market isn’t the only pond you can fish in.

Take a look at the past two months of data on different country ETFs.

I went back to the March lows to do some comparisons. You may not be surprised to know that the #1 performer YTD has been Brazil (EWZ). It’s up +13.28%. In contrast, SPY is still down -4.11% YTD, even after this nice rally off the March lows.

Even though EWZ has put in a very nice showing since the beginning of the year, it is not without it’s share of volatility. The maximum drawdown has been over -15%. If you’re not willing to hold it through that kind of volatility, you might want to think twice. Trend traders beware getting whipsawed. However, it does set up situations where it can be swing traded.

Other top performers to check out are Taiwan (EWT), up 9.12% (-11.44% max drawdown); Mexico (EWW), up 6.18% (-11.21% max drawdown), and Canada (EWC), +4.27% with a max drawdown of -12.85%. Obviously, these carry a lot of volatility.

More recently, since the March lows, there have been some interesting developments. The number one performing country ETF is no longer Brazil. It’s Austria (EWO), with a 15.89% return since March 7. Drawdown has only been -5.89%, so it is in a trend upward.

Following Austria, in order of RS, with corresponding returns and drawdown are: Singapore (EWS) +15.55% / -6.49%; South Africa (EZA) +13.36% / -9.20%; Brazil, +13.13% / -9.22%; and Sweden (EWD), +13.03% / -5.28%.

In particular, EWO, EWS and EWD are establishing good upward trending action the past two months.

Not to be ignored, SPY has made a nice showing of +8.09% with a -3.24% maximum drawdown.

Another reason to consider these country ETFS is their non-correlation to the U.S. market. These numbers are measured over the past two months.
EWO 43.28% correlated

EWS 90.67%

EZA 36.13%

EWZ 31.95%

EWD 22.33%




Disclaimer: For informational purposes only.

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Sick, Hung Over, But Savoring the Victory

[youtube:http://www.youtube.com/watch?v=Wy-ht52-3pk 450 300]

In spite of being so sick that I almost coughed up my left lung, I embarked on one of my “drink ’til dawn, sleep ’til noon” episodes in celebration of last nights win. Needless to say, the hangover spilled over into today’s trading session. Live hard, die hard.

[[SNCR]] vomited all over me today as the company reported in line earnings, but guided lower. In addition, my accounts were down over 1.5% today. I feel like choking somebody.

Maybe there is something to this tab’s “curse of Ducati”…..Naw…fuck that. I spit on the curse.

I spent part of the day trimming back positions in [[APA]], [[APC]], [[NUE]], [[AKS]], [[AGU]], [[UNG]], [[NGAS]] and a few others. As I had commented on an earlier post, the caution light is on. They’ve had some very nice runs since I bought them and I want to keep the profits, much to the delight of the IRS. I still have a bullish bias at this point.

While today’s correction was to be expected, it bears (no pun) watching closer. Fortunately for the bulls, this pullback was not on heavy volume, so throwing in the towels along with the bathroom sink is premature at this juncture.

(*cough*, *cough*…)…Off to eat more chicken noodle soup with Tylenol.

Parting thought: Jeff Mackey is on coke.

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