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Should You Avoid PepsiCo, Inc. (PEP)?

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PepsiCo, Inc. (NYSE:PEP)’s status as one of the world’s largest beverage companies has endeared it to many investors, along with its penchant for emerging market growth. But should you avoid investing in it?

Now, according to many of your peers, hedge funds are assumed to be useless, old investment tools of an era lost to time. Although there are more than 8,000 hedge funds in operation currently, this site focuses on the crème de la crème of this club, around 525 funds. Analysts calculate that this group has its hands on the majority of the hedge fund industry’s total capital, and by tracking their highest quality equity investments, we’ve brought to light a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as necessary, optimistic insider trading sentiment is another way to analyze the financial markets. As the old adage goes: there are a number of motivations for a bullish insider to sell shares of his or her company, but only one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the impressive potential of this method if piggybackers know where to look (learn more here).

What’s more, it’s important to analyze the newest info surrounding PepsiCo, Inc. (NYSE:PEP).

PepsiCo, Inc. (NYSE:PEP)

What does the smart money think about PepsiCo, Inc. (NYSE:PEP)?

At the end of the second quarter, a total of 46 of the hedge funds we track were long in this stock, a change of -2% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially.

According to our 13F database, Yacktman Asset Management, managed by Donald Yacktman, holds the most valuable position in PepsiCo, Inc. (NYSE:PEP). Yacktman Asset Management has a $1.8774 billion position in the stock, comprising 8.9% of its 13F portfolio. The second largest stake is held by Nelson Peltz of Trian Partners, with a $1.0036 billion position; the fund has 19.8% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include Ken Fisher’s Fisher Asset Management, Boykin Curry’s Eagle Capital Management and Kerr Neilson’s Platinum Asset Management.

Judging by the fact that PepsiCo, Inc. (NYSE:PEP) has faced a fall in interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers who sold off their full holdings at the end of the second quarter. At the top of the heap, James Crichton and Adam Weiss’s Scout Capital Management cut the biggest investment of all the hedgies we track, comprising close to $255.1 million in stock. Larry Foley and Paul Farrell’s fund, Bronson Point Partners, also cut its stock, about $31.6 million worth. These moves are interesting, as total hedge fund interest fell by 1 funds at the end of the second quarter.

How have insiders been trading PepsiCo, Inc. (NYSE:PEP)?

Legal insider trading, particularly when it’s bullish, is best served when the company in question has experienced transactions within the past half-year. Over the last 180-day time period, PepsiCo, Inc. (NYSE:PEP) has experienced 1 unique insiders buying, and 11 insider sales (see the details of insider trades here).

We’ll also review the relationship between both of these indicators in other stocks similar to PepsiCo, Inc. (NYSE:PEP). These stocks are Dr Pepper Snapple Group Inc. (NYSE:DPS), Coca-Cola HBC S.A. (ADR) (NYSE:CCH), Coca-Cola Enterprises Inc (NYSE:CCE), Coca-Cola FEMSA, S.A.B. de C.V. (ADR) (NYSE:KOF), and The Coca-Cola Company (NYSE:KO). All of these stocks are in the beverages – soft drinks industry and their market caps match PEP’s market cap.

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