Currently, PepsiCo, Inc. (NYSE:PEP) controls 40% of the global salty snack market. Forty percent! Combine that with a 30% share of the global soft-drink market, and you own the premier consumer product powerhouse stock.
Both companies have spent decades establishing their brands. As a kid in the late 1970s, I remember watching the news and seeing Pepsi sold for the first time in the former Soviet Union. Muscovites lined up around the block to buy their rationed two or three 12-ounce bottles of Pepsi, which they immediately guzzled. But what struck me was what they did next: They saved the empty bottles as souvenirs. That demonstrates the cultural power of the brand — and that’s why investors need to own it.
Risks to consider: Investing in emerging and frontier markets is always a dicey undertaking. Variables such as runaway inflation, fluctuating currency exchange rates and sudden regime change pose risks. Gaining exposure to these markets through multi-national mega-cap stocks is an excellent way to offset those risks.
Action to take –> Sodastream International Ltd (NASDAQ:SODA) is a neat idea, but don’t look for the company’s devices in Kenyan kitchens for a decade or so. The Coca-Cola Company (NYSE:KO) shares currently trade just under $39 with a 2.9% dividend yield. While the forward price-to-earnings (P/E) ratio of 18 suggests the stock is fetching a premium price, it’s a premium worth paying based on a half-century of dividend growth and a gigantic global opportunity ahead.
A 12-month price target of $49 combined with the dividend would represent a total return of nearly 30%. PepsiCo, Inc. (NYSE:PEP) shares change hands at around $81 and yield 2.8%. Like its archrival, Pepsi demands a premium forward P/E of 18 due to the high quality and dependability of the stock. With a multi-line business that includes the world’s largest snack food business and the global vision of growth, PepsiCo shares can reach $100. Factoring in the dividend, that’s a total return of close to 27%.
P.S. — At StreetAuthority, Game-Changing Stocks editor Andy Obermueller is convinced that 2014 will be a year of explosive growth for Sodastream International Ltd (NASDAQ:SODA) — at the expense of The Coca-Cola Company (NYSE:KO) and Pepsi. That’s one prediction he’s making in his latest report, and his track record speaks for itself: Andy’s previous predictions have returned gains of up to 310% in a year. For more of Andy’s predictions, including how Apple’s next breakthrough could kill the traditional bank, click here.
– Adam Fischbaum
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