Don’t Underestimate Dr Pepper Snapple Group Inc. (DPS)

We can see that Dr Pepper has the highest level of institutional ownership. A high proportion of institutional ownership provides a support and stability to the stocks, as institutional investors are generally long-term investors.

I think that negative sentiment around input costs and potential future competitive challenges with PepsiCo and Coca-Cola obscures the current reality of a strong, concentrated business that generates significant cash flow. In my view, Dr Pepper is well positioned in the more attractive beverage categories with relatively high growth profiles and margin; the company has a portfolio of strong brands across categories, which provides balance and potential upside from hidden gems; and strong free cash flow, cost savings opportunities, and a shareholder-friendly capital allocation philosophy should help optimize returns. In addition, additional cold drink assets and fountains provide significant multi-year growth opportunities. Hence, I rate it as a buy.

The article Don’t Underestimate This Beverage Company originally appeared on Fool.com and is written by Neha Gupta.

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