As an investor, it doesn't pay to follow the crowd.
In this series, though, we highlight a possible exception -- the collective wisdom of our CAPS community. Read the next section if you're unfamiliar with our methodology. Skip it if you want to go straight to the results.
Why this crowd is different
Jumping into a stock because your rich neighbor did, or because you heard about it from your friend's uncle who used to work on Wall Street, or because CNBC has been talking about it nonstop is a recipe for disaster.
If there's one thing I've learned as a stock analyst, it's that any stock can be gussied up to sound like a world-beater. If there's a second thing I've learned, it's that being a smart person doesn't make you a good investor.
In the hands of a smart person with good communication skills, the never-were and never-will-be stocks sound like tickets to instant fortune. The ancient Greek philosophers made the distinction between rhetoric and knowledge. The former is convincing; the latter is true.
That's why we factor in track record in our Motley Fool CAPS community. We invite everyone to give stocks an outperform (i.e., a "buy") or underperform rating (i.e., a "sell") in CAPS. We then use those opinions to calculate a rating for each stock -- from one to five stars (five being the best). But -- and this is a big distinction -- we give more weight to the opinions of folks whose picks have performed well in the past.
The top 10 food & drink buys
So, with that methodology as prelude, I present to you the top seven stocks that are involved in the food and drink industry based on the number of CAPS members who have rated the stock an outperform. Only stocks garnering a five-star rating are included.
|
Company
|
Market Capitalization (in millions)
|
Outperform Picks
|
CAPS Rating (out of 5)
|
|
PepsiCo (NYSE: PEP )
|
$103,700
|
3,907
|
*****
|
|
Diageo (NYSE: DEO )
|
$42,910
|
2,312
|
*****
|
|
Unilever (NYSE: UL )
|
$76,260
|
730
|
*****
|
|
Molson Coors Brewing (NYSE: TAP )
|
$8,500
|
607
|
*****
|
|
ConAgra Foods (NYSE: CAG )
|
$9,530
|
553
|
*****
|
|
Imperial Sugar (Nasdaq: IPSU )
|
$154
|
402
|
*****
|
|
Gruma (NYSE: GMK )
|
$772
|
356
|
*****
|
Source: Motley Fool CAPS as of August 12, 2010.
More CAPS members think Pepsi is a buy than any other five-star food and drink stock. Do you think a different stock deserves to be the No. 1 buy? Make your thoughts known in CAPS by clicking here. Or just click through to do further research on one of these popular stocks.
As for me, I think both Pepsi and Diageo get really intriguing under $60 a share. If they reach that point, I'll be more willing to give them each outperform ratings in CAPS (and may also reach for my wallet). You can see my CAPS profile here.
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