Furthermore, the forward earnings multiples and earnings growth multiples indicate that they are fairly priced, and initiating a long position at these prices may not entail much upside.
I’m, however, expecting a crash. PepsiCo, Inc. (NYSE:PEP)’s latest soda isn’t in the U.S. yet, and its entry in the States would certainly attract the FDA. Unless PepsiCo adds actual nutrients in its soda, it is highly unlikely that FDA is going to fall for it. Even Europe has strict drug administration authorities, which act in a similar fashion to the FDA. In my opinion, the hype surrounding PepsiCo could be the cause of its downfall, or at least, a minor crash.
It wouldn’t be wise to expect the sudden disappearance of carbonated beverages. Demand might dwindle with healthier drinks hitting the shelf, but the aggressive marketing campaigns of PepsiCo, The Coca-Cola Company (NYSE:KO), and Monster Beverage keep on luring the young.
Despite the risks, Yacktman Asset Management owns $1.54 billion worth of PepsiCo, Inc. (NYSE:PEP)’s shares, but hedge funds aren’t initiating significant positions in the company at current prices. Meanwhile, insiders of Monster Beverage (including its CEO) have sold around 2.2 million of its shares over the last 12 months.
Shifting focus to Coca-Cola, Berkshire Hathaway owns $14.5 billion worth of its shares, which remains Buffett’s largest single holding in a company. Frankly, I’d be worried for Coca-Cola if Buffett reduces his holdings in the company.
With that in mind, if I had to pick one company from the mentioned brands, I’d pick The Coca-Cola Company (NYSE:KO) for its track record of stable and steady organic growth. Its shares are trading at their 52-week highs, yet they appear to be fairly valued. And to top it all, analysts estimate its annual EPS to grow nearly 9% over the next five years.
Piyush Arora has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Monster Beverage, and PepsiCo. The Motley Fool owns shares of Monster Beverage and PepsiCo.