Can These Stocks Bounce Back?
However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.
There are 107 stocks listed under "food & beverage" in the CAPS' screener, but more than a handful of them carry well-respected four- and five-star ratings. Those accolades mean our 180,000-plus CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:
CAPS Rating Today
52-Wk Price Change
Est. 5-Yr. Growth Rate
|Central European Distribution (NAS: CEDC)|
|Diageo (NYS: DEO)|
|PepsiCo (NYS: PEP)|
Source: Motley Fool CAPS.
International and financial worries are again gripping the market, but with the S&P 500 still up 2% over the last 12 months it might not be so surprising to learn the CAPS automotive stocks have done worse, rising more than 9% in that same time span. So let's take a closer look at why investors think some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.
Its performance has been as cold, gray, and dreary as its name, and the only life Central European Distribution has seen was when investors thought a private equity firm might make a buyout offer. Attacks on its market share in Poland continue unabated and its entry into Russian markets is hampered by the country's attempt to extract heavy licensing fees and tariffs.
According to Fitch Ratings, the price of a half-liter of mid-priced bottle of vodka will rise by as much as 50% between now and the beginning of 2014, making any manufacturer price increases impossible. As the premier vodka distributor in Poland and Eastern Europe, CED is facing enormous challenges since Russia accounts for more than two thirds of its revenues. Last quarter it suffered a 26% drop in volume in the country because of the issues there.
I had speculated that Diageo or Brown-Forman (NYS: BF.B) might make good companies to take over CED's business particularly as the latter is heavily vested in Russia for its brands that include Finlandia Vodka. Diageo has fended off its own merger advances by owners of privately held Stock Spirits which attempted to lure it into a deal. And with mergers still a possibility in the industry, some speculate the newly spun off Beam spirits giant (formerly Fortune Brands) could be a target for Diageo and Pernod Ricard. Beam, though, trades at 21 times forward earnings estimates; CED, just six.
It's clear Diageo is a driving force in the industry today and should be closely watched. CAPS member dnelyo is doing just that, liking its share repurchase program: "[B]uying back shares and vices do well during a depression-- great play for the continuing downturn."
Jeffrey2012 doesn't see the same sort of growth levers for Central European Distribution, particularly as Russia tries to curb alcohol consumption with its onerous new fees: "Company has a heavy debt load and considering it's dependence on the European market, it looks pretty grim. No reason for it to be rallying this hard."
Get your drink on
In the non-alcoholic beverage market, PepsiCo continues to lag Coca-Cola (NYS: KO) ; the latter's shares have jumped 15% over the past year compared to a 1% increase for Pepsi. While its snack business has held up well, Pepsi's beverage sales have been soft, particularly in the Americas where it saw just 3% growth, primarily as a result of price increases; yet, Gatorade has remained strong, enjoying a 9% jump in sales on top of a 15% increase last year.
Dr Pepper Snapple (NYS: DPS) had similar lackluster growth with volumes falling 1% year over year, though profits improved. It initiated price hikes as well, but that didn't stop a slide in margins for the beverage maker.
Unlike Kraft (NYS: KFT) and Sara Lee, Pepsi has no intention of calving off its different business lines, believing a unified snack-and-beverage company will be able to deliver best the most value to shareholders. And at less than half the valuation Coke carries based on revenues, it looks pretty cheap too.
Highly rated CAPS All-Star member dividendsrus naturally likes the dividend Pepsi pays (it currently yields 3.3%) and that it is otherwise a financially sound company: "This stock isn't very hyped but it is a solid company that pays good dividends."
gameguru would find it hard to argue with that assessment, even if he's not enamored of the soda itself.
I hate Pepsi the cola, but the stock sure does look tasty right now. Selling at 15x earnings with a nearly 3% yield, and a stable of consumer brands that will bring in consistent earnings. Drink it up!
Tell us on the PepsiCo CAPS page if you think it's a tasty treat and add the beverage slinger to your watchlist to see if it's merely pausing to refresh itself.
The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool owns shares of PepsiCo, Diageo, and Coca-Cola.Motley Fool newsletter serviceshave recommended buying shares of PepsiCo, Coca-Cola, Diageo, Beam, and Central European Distribution.Motley Fool newsletter serviceshave recommended creating a diagonal call position in PepsiCo. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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