KO vs. PEP

[EagleTed]

I've owned both in the past, now own only PEP. With the gap developing between the two stock's performance, I'm now considering KO as an investment. However, the question remains, should I simply add to PEP or buy KO, which is the best investment?

Stats:
.......P/E. FP/E ROA ROE .DY% P/B P/S D/E. EarnGrowth
PEP .24.0 19.6 14.4 31.2 1.83 6.9 3.0. 0.23. 7.70
KO ..21.7 18.8 17.2 34.3 2.30 7.0 4.8. 0.44 .42.5


KO has a slight advantage from a value standpoint, but neither are cheap. PEP has a slight advantage in debt load, and their management seems to be a little better in that they have successfully managed diverse businesses. KO is more focused on the beverage business, which could be a plus.

All in all, a tough decision, therefore, I'm sticking to the adage, if it isn't obvious, leave it alone.

I'll look elsewhere. Both companies, imo, are long term holds.

[The_Sonarman]

Given, I am limiting myself to the following two choices:

a. Add PEP to existing PEP shares, or
b. Keep existing PEP shares and add KO

IMHO, I would choose to add shares of KO for the following reasons:

1. diversification (ie. hold both)
2. annual dividend is much better for KO versus current share price

Recent:

KO ~$40 annual dividend $1.00
PEP ~$48 annual dividend $0.92

That's an annual 2.5% on KO and 1.9% on PEP. Not great, but a modest difference.

Small differences in market share and the like would not prompt me to load up solely on KO, or PEP. If I were holding either, and I was considering additional shares, I'd hold both in my portfolio.

Depends on what you are trying to accomplish, of course.

[EagleTed]

KO has kept falling since I posted. I have an GTC (Go 'Til Closed) order in for KO at $38.40. I also purchased CL since this post.

[The_Sonarman]

Hello EagleTed,

I am more a trader, neither bullish nor bearish (ie. neutral). I go long and short, on stocks, options and currencies.

[EagleTed]

Also bought MRK the other day. Figured the market oversold it on the Vioxx news. Sold KFT, which I figured to be 'dead money' for the next couple of years, or until their management gets a good handle on what today's consumers want.

MRK will still have about $6 billion in free cashflow, so that's a pretty good investment, imo. Of course, investors are rightly worried about lawsuits from the Vioxx fallout.

[The_Sonarman]

Not to mention losing 2 billion plus in future cash flow off sales of Vioxx

[EagleTed]

Added more MRK the other day. While the risks of heart attacks went up with VIOXX, there was no statistically significant increase in deaths over placebos in any study.

Assuming $20 Billion in liability from Trial Lawyers (twice any reasonable estimate I've seen) you're still buying a minimum of $5 Billion of cashflow for $80 Billion (Market Cap plus the $20 Billion liability). A better than 6% Earnings Yield, insuring the dividend is safe if MRK wishes to maintain it.

All just my opinion, buy at your own risk.

[EagleTed]

Oh yeah, I also bought CL since my last post. Colgate is one of the premimun brands in the world, and the company is reducing it's profits in order to strengthen their brands. It should work out well for them in the long-run.

Again, all just my opinion, it's your money, your risks.

[EagleTed]

Well, I noticed I already reported the CL buy. As far as KO, it's still on my "to buy" list, just hoping to catch it at an even lower price.

[EagleTed]

Lost patience with KO and bought today @39.40. Time will tell, but I'm prepared to buy more at a cheaper price.

It has a Enterprise Value (market cap + debt) of 97 Billion, free cashflow of better than 5 Billion. Not a great return on investment (little better than 5%), assuming no growth in earnings. Still, it's a premium company and probably worth it.

If the new CEO can make it a growth company again, it'll be a great buy. If not, just a solid company and I guess 5% is acceptable, although not outstanding.

If it drops more than 10% I'll add shares.

[EagleTed]

Bought GCI (Gannett Newspapers), publisher of USA Today and over 100 newspapers. Looks like a slow growth business going forward, but their internet business seems to be growing fairly well. It has the financial wherewithal to grow by M&A.

Considered TRB and KRI before settling on GCI. GCI may not be a good fit for your portfolio, but I wanted to diversify into a media stock and liked GCI valuation (low P/E, decent dividend).

As always, do your own Due Dilligence. You may be more or less risk tolerant than I am.

[EagleTed]

Since my last post, I've sold some of my XOM and bought some CSCO.

XOM's run-up made it too big a percentage of my portfolio. CSCO I bought because I think it's reasonably priced for what I still consider a growth company.

As always, do your own Due Dilligence.

[EagleTed]

Bought HDI, sold MRK.


MRK made a nice run for me off it's bottom, but I'm not sure I want to own it for a long time, so I sold.

HDI looks undervalued below 50, so I bought.

[EagleTed]

Bought BUD today @46.50. Morningstar values it's fair value at $64 a share, and I tend to agree it's undervalued on Wall Street. Do your own due dilligence before you decide if this BUD's for you.


This is a company I've wanted to invest in for a long time, but was unimpressed by their management team. With Warren Buffett taking a position on the company perhaps their management team will improve, especially if he goes on their board.

[EagleTed]

I'd rate BUD a strong buy. Buy it while it's on sale.

JMHO, do your own dd. If you don't know the risks of buying individual stocks, educate yourself before engaging in it.