Those mysterious yet all-important "specialists," who make the market by standing ready to buy and sell shares at investors' whims, got whacked today by a $241.8 million settlement with the Securities and Exchange Commission (SEC). Five trading specialists, including subsidiaries from Bear Stearns
Chalk one up for the little guy, but we've still got a long way to go.
In today's Motley Fool Take:
- PepsiCo Stays Cool
- Shameless Plug: Hidden Gems
- Mutual Funds Watch Their Backs
- Quote of Note
- Kraft's Very Fine Purchase?
- Discussion Board of the Day: Low Carb Way of Life
- More on Fool.com Today
PepsiCo Stays Cool
By Dave Marino-Nachison
Investors picked up shares of soda-and-snack giant PepsiCo
PepsiCo's latest growth figures are impressive. First-quarter revenue rose 10% as, the company said, "performance across all businesses [was] strong." Now PepsiCo says it expects to hit the high end of the full-year earnings per share (EPS) guidance it provided in early February, projecting net income of $2.29 per share.
What Pepsi has decided to do with all that cash represents classic big-company behavior. Pepsi plans to repurchase $7 billion worth of shares over the next three years, following the anticipated completion of the current $5 billion buyback plan. It is also bumping up its annual dividend payout from $0.64 to $0.92 per share. The larger a company gets, the more difficult it can be to find outlets for its cash that don't threaten to derail a business' focus.
PepsiCo has pulled off some solid deals in recent years, grabbing Gatorade from the Quaker Oats stable, snapping up independent drinkster South Beach Beverage, and swallowing Seagram's Tropicana line. Those pickups have helped turn PepsiCo into a company with nearly $27 billion in 2003 revenues -- nearly as big as Coca-Cola
As PepsiCo gets bigger, however, it will become more difficult for it to snag brands that will have a real impact, even with its recent history of massive free cash flows. New products and brand variations can help as the company identifies trends -- it was juice, then water, and now no-carb drinks, it seems.
Given all that, PepsiCo appears to be doing everything it can to maintain strong profit growth and keep investors interested. Its recent success at both makes it easy to understand why the company's shares have outperformed Coca-Cola, Cadbury-Schweppes, and the Standard & Poor's 500 over the last five years.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.
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Mutual Funds Watch Their Backs
By Selena Maranjian
By now you've surely heard of the massive scandals swirling around many of the most well-known mutual fund companies. We've covered this topic many times in the past, and we even recently released a new newsletter to help ensure investors pick the best funds and never fall prey to improprieties.
The good news resulting from the scandals is that many funds are surely cleaning up their acts now, not wanting the negative publicity and loss of investor capital that comes with disgrace. There's some less good news, too. According to a recent Boston Globe article, many mutual fund companies are tacking on disclaimers to their disclosures in an attempt to protect themselves against lawsuits.
The Globe cited the example of FleetBoston Financial
Is this entirely bad? Not really. After all, it is unlikely that any fund could completely prevent every instance of market timing or other no-nos. So, you might view the disclaimers as simply pointing out to investors that they can't assume that everything will always be above-board. Still, critics view the disclaimers merely as self-protection. Massachusetts Secretary of State William F. Galvin said, "There is no excuse for this.... It shows me they've learned nothing at all from their recent experience, and they're unrepentant."
If you're dismayed by mutual fund scandals and not sure what to do with your investing dollar, consider the glorious index fund, which we've long recommended for many investors. Index funds have outperformed the vast majority of stock mutual funds over many time periods. An investment in an S&P 500 index mutual fund, for example, will have you instantly invested in 500 major American companies, such as PepsiCo
Of course, if you'd like to do even better than that, there are reputable fund families out there, with talented managers and admirable track records. Shannon Zimmerman, the editor of Motley Fool Champion Funds, is constantly separating the wheat from the chaff and delivering promising fund recommendations each month. Check out a free issue.
Longtime Fool contributor Selena Maranjian owns shares of Pfizer.
"I would never die for my beliefs because I might be wrong." -- Bertrand Russell
Kraft's Very Fine Purchase?
By Alyce Lomax (TMF Lomax)
It's a departure from Oscar Mayer, Velveeta, and Nabisco's Chips Ahoy -- and perhaps a welcome one. Kraft Foods
Though Veryfine is known for juice, it's got a product line called Fruit2O, flavored waters that have been quite popular -- in fact, that product's cited as the No. 1 flavored water here in the U.S. Veryfine had $150 million in sales last year.
In addition to Fruit2O, the acquisition will add Veryfine's line of juices, as well as Fruit2O Plus, flavored with Atkins' favorite sweetener, Splenda. It also provides other beverages, including plain, old-fashioned bottled spring water. (Hopefully, the water is trouble-free, given the recent problems that have dogged Coca-Cola's
Considering that not so long ago, Kraft was whacking jobs to boost profitability, the company's in need of some kind of infusion. Kraft, which is majority-owned by tobacco giant Altria Group
Juice hasn't exactly been a fashionable flow lately, what with the impact of low-carb diets on consumer thirst, but maybe the flavored waters will give Kraft a little more of an adult spin on its beverage selection.
While the deal may not be a cure for what's been ailing Kraft, it's probably a step in the right direction. That is, a step away from much of its traditional fare.
Alyce Lomax does not own shares of any of the companies mentioned. She was leery of sugary juice long before Atkins hit the scene.
Will trimming back on your carbs as suggested by the Atkins and South Beach Diets really help you trim down? What is a net carb? What are realistic results once you get started? All this and more -- in the Low Carb Way of Life discussion board. Only on Fool.com.
Why has Wall Street turned against a company that increased revenue by 50% and almost doubled its earnings? Seth Jayson takes a hard look at dot-com survivor J2 Communications in Is J2's Punishment Justified?... On the flip side, Genentech is the good stock that can do no wrong. But is it possible for the company's earnings to grow into its current valuation? Charly Travers thinks that's unlikely.
In other news:
For a list of all our stories from today, see our Today's Headlines page.