The BMW Method
Re: How about a Pepsi?

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By stevpete
September 29, 2004

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Why I like PEP better than KO

Just check out the charts. This is a link to hildy's library:

Pull up both the KO 9/24/04 and the PEP 9/27/04 charts at the same time by right-clicking on the title & selecting "Open in a new Window".

What I do not like about KO, despite the fact that it is low relative to the low CAGR is that is has been in a slow decline ever since 1998. Despite changes in management and despite the fact that Coke Classis is far and above my soft drink of choice, along with millions of other people, this company has not shown me over time that they can turn around. A person could have made great money in KO by shorting it and reaping short-term capital gains repeatedly for the last six years.

I know that the BMW Method has as a stake in the ground the 'fact' (hypothesis?) that great companies revert to and overshoot the mean and we want to chart that and knowledgeably buy low and sell high, hopefully obtaining long term capital gains repeatedly along the way.

I am totally unconvinced that a losing corporate culture has not taken hold of KO. Call me in 10 years. There may be great money to be made with KO, but not mine, not yet.

PEP, on the other hand is a super BMW-style winner. For the last 30+ years, it has always been trending upward. The downtimes have all lasted less than ~2 years, and have always been followed by great growth. I have always made money with PEP, even when I did not have the BMW to inform me about proper buy & sell points. This is a company that I have a lot of faith in, business-wise. They have had setbacks of note in stock price in 03/1993, 03/1998, 03/2002, and 04/2004 including the recent price slide. Each and every time, the stock price has returned to an equal or higher dollar level! Most of these times it has returned to a predictable High CAGR level! And each and every time, big drops have been followed by a sustained period of growth lasting 2 to six years. I would judge the drop of the last few days is nothing more than day-trader noise. Now or soon is a buying opportunity to get into PEP as a CAGR close to the low seen on ~1/31/03.

PEP has shown me that they follow the BMW model. KO has not. Let the day-traders work with KO - it looks more like a cyclical than a growing stock to me.


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