Despite the fierce rally, high-quality companies at great prices can still be found. Watch a few minutes of CNBC. Read a few blogs. Talk to a few opinionated people. There's no doubt about it: Fear still isn't hard to find. And that's great news for those on the hunt for great investments.
Using our Motley Fool CAPS ranking system's screening tool, I scanned for a few five-star-rated companies -- the highest our CAPS community offers -- that might aid your bargain-hunting ambitions. Have a look:
|
Company |
Recent Price |
TTM Return on Equity |
Forward P/E Ratio |
|---|---|---|---|
|
ArcelorMittal (NYSE:MT) |
$36.50 |
15.6% |
13.1 |
|
Copart (NASDAQ:CPRT) |
$33.32 |
15.3% |
15.9 |
|
PepsiCo (NYSE:PEP) |
$62.08 |
34.1% |
14.8 |
|
Gilead Sciences (NASDAQ:GILD) |
$46.81 |
42.5% |
15.0 |
|
Rio Tinto (NYSE:RTP) |
$206.18 |
17.8% |
13.5 |
Data from Motley Fool CAPS and Yahoo! Finance, as of Nov. 10, 2009.
None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can rerun an update of this screen yourself, if you like.
A closer look at PepsiCo
Looking for a few reasons to invest in PepsiCo? I've got five:
1. International exposure
In 2008, 48% of PepsiCo's net revenue came from outside the United States. If you're worried about a weak dollar but don't want to jump on the gold bandwagon, a high-quality company with broad international exposure is about as good as it gets. And short of a pure international play like Philip Morris International (NYSE:PM), the 48% international exposure you get from PepsiCo is about as broad as you can ask for.
2. Cash, cash, cash
The current 2.9% dividend isn't even half the story. What's important about PepsiCo's dividend is that it's been raised every single year since at least 1990. That's growth. That's stability. That's great.
3. Diversification
You think of Pepsi, and you think exclusively of the cola. (Maybe a Britney Spears commercial, too.) But in truth, snack-food segments actually make up a significant portion of sales:
|
Segment |
2008 Revenue |
Percentage of 2008 Revenue |
|---|---|---|
|
Frito-Lay North America |
$12.5 billion |
28.9% |
|
Quaker Foods North America |
$1.9 billion |
4.4% |
|
Latin America Foods |
$5.9 billion |
13.7% |
|
Pepsi Americas Beverages |
$10.9 billion |
25.2% |
|
United Kingdom & Europe |
$6.4 billion |
14.8% |
|
Asia, Middle East and Africa |
$5.6 billion |
13.0% |
4. Cheaper than Coke
On a comparative basis, PepsiCo is a hair cheaper than its archrival, Coca-Cola (NYSE:KO). Pepsi currently trades at 14.8 times next year's earnings estimates, compared to Coke's 16.3 multiple. Both are great companies with world-class franchises, but why not take the cheaper of the two?
5. Our CAPS community loves it
Of the more than 3,700 CAPS investors rating PepsiCo, roughly 97% expect it to outperform the broad market indices going forward. One of them is CAPS All-Star 00100, who recently wrote:
Upthumb. Very good cash flow. Nominal payout. 9% sales growth. ... high quick ratio and low to nominal debt ratio. 56% margins. Lots of room to grow and the capital base and cash flow to do it.
CAPS member SkinneeJ notes Pepsi's long-term performance, writing: "There aren't too many periods that you can find where [Pepsi] doesn't outperform the s&p. I'll take my chances that this stock is one that you can own until you get old and decrepit."
You take it from here
Have your own take on Pepsi? More than 140,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.
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