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Saturday, October 6, 2012

Coke VS. Pepsi

One of the greatest battles in foodstuffs history, the everlasting clash of Coca-Cola (KO) and PepsiCo (PEP). These two worldwide beverage manufacturers and distributors have been competing since the 1890s, specifically 1892 for Coke and 1898 for Pepsi (Coca-Cola really is the first, Pepsi fans...). The current CEO of Coca-Cola is Muhtar Kent and of PepsiCo is Indra Nooyi. The stock prices of the two on Sunday were $37.93 and 70.77, respectively.
Now, let's focus on Coca-Cola. We bought ten shares on Monday priced at $38.16 each. After a full week of trading, the shares are now priced at $38.58. Profit! Since 2009, the company has been growing at a fantastic rate, near doubling the stock price. On September 13th, Coca-Cola was reintroduced into Myanmar following a fifty-two year hiatus, increasing the price by a quarter of a point. Almost two weeks later, Coca-Cola partnered with Global Fund; with its widespread distribution network, the company is able to help spread critical medicine to regions in need, in regions such as Ghana, Tanzania, and Mozambique. This partnership also elevated stocks by a quarter point, but more importantly will aid untouched parts of Africa in critical times.
Enough Coke, who wants Pepsi? As with Coca-Cola, we bought ten shares of PepsiCo at $70.70 a piece. Again like Coke, we made a profit as the shares are now at $71.10. This company has seen much steadier growth output on the market since incorporation. Since 2008, PepsiCo has strongly recuperated and we expect it to reach 2007 levels soon. On September 12th, the shares actually suffered a near-dollar loss due to its favorite rival - Coca-Cola. On this date, Coke introduced RimZim, a rejuvenated drink made with exotic Indian spices, in India, after noticing a prolonged loss in competitiveness in the second-most populated country. Stocks remained on the lower spectrum (closer to $70) until September 26th. Before discussing this, it is crucial to note that Pepsi is based in the Netherlands, for tax reasons. On this date, PepsiCo won the "Debt vs. Equity" dispute caused because the company was taxed and treated as an American company. This sent the shares back in the $71 region, that is until the next few days (but back up this week!).
We were happy with our investments in both companies this week. Although PepsiCo has greater cash flow, Coca-Cola has a greater market cap. Which would you invest in? We recommended both, but for different reasons - short-term is better for PepsiCo, as it is expected to grow by about 4% over the next fiscal year; long-term is better for Coca-Cola, as it is expected to grow by 7% over the next FY, reaping 75% more profits than Pepsi, considering the amount of stocks one can buy with limited funds. Sorry to all Pepsi fans out there, but the monetary battle between Coke and Pepsi is won by Coke, although we do recommend both of these medium-risk investments.

Feel free to leave comments on both your investing decisions between the two companies, your favorite drink, and any comments about the blog.

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