PepsiCo: How Beta Can Lead To Alpha

Dec. 09, 2024 12:32 PM ETPepsiCo, Inc. (PEP) Stock18 Comments
(15min)

Summary

  • PepsiCo's stock is trading at a discount to its fair value, making it a prudent addition to portfolios, especially given its low beta statistic.
  • The company has a strong track record of growing dividends for 52 consecutive years and returning capital through share repurchases.
  • Despite recent challenges, PepsiCo's diversified business and stable cash flows position it well to navigate current economic conditions.
  • Weakness in FLNA and AMESA segments is considered cyclical, not structural, with long-term prospects remaining positive.
Pepsi Beverages Company Signage. Pepsi and PepsiCo is one of the largest beverage producers in the world IV

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Introduction

PepsiCo, Inc. (NASDAQ:PEP) delivered 1.3% organic net revenue growth in Q3 2024 as compared to the 8.8% organic revenue growth in Q3 2023. On a GAAP basis, net revenue contracted 0.6% for the third quarter. As one of the largest companies

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I am a CFA charterholder and a CIPM certificant. Professionally, I assist firms comply with the Global Investment Performance Standards (GIPS). The GIPS Standards has to do with how investment performance is calculated and presented by asset managers, pension funds, endowments and foundations. Previous to my current profession, I owned and operated a small business. I helped built the business from the ground floor and diversified its revenue stream. I have a firsthand experience of looking for avenues to expand margins and manage costs. I also created a portfolio to reallocate capital externally. This increased my investment universe and mitigated the risk of a concentrated position in a private business. I have a fundamental, bottom-up approach to my research. I read 10-Ks and listen to earnings calls. I recast financial statements to focus on true economic earnings and avoid elaborate models that could lead to false precision. I believe my background and experience gives me the requisite tools to sift through the information and assess a company's competitive position. I have a meaningful amount of my net worth invested. I am a conservative, long-term investor and rely on dividends to pay for some expenses. My portfolio is tilted towards companies with above-average sustainable profitability that pass value-oriented criteria.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of PEP either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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