PepsiCo: Snacks will outlive recession

January 23rd, 2008 | Category: Bargain Stocks

Even in a recession, humans will “snack” themselves to the point of sugar highs so compelling that they will think the economy is still expanding. According to Reuters, “PepsiCo (NYSE: PEP) expects its trade based on “comfort foods” to be resilient to a U.S. profitable slowdown, Chief Executive Indra Nooyi said on Wednesday.”

The point is probably well-founded. Soda and chips are still something humans can enjoy for a few dollars. And many public are addicted to the sugar and salt. And it makes Pepsi and rival Coke (NYSE: KO) effective hedges against a downturn.

Pepsi sells for just by

$69 now, down from a 52-week high of nearly $80. It has a yield of 2.1% and $2.2 billion in cash and short- term investments. The company has an operating margin of about 20%. In the final quarter, operating income was $2.1 billion on revenue of $10.2 billion. Coke’s financial dynamics look about the same.

All in all, that makes these stocks “safe” bets whether the markets continue to fall.

Douglas A. McIntyre is an editor at 247wallst.com.