We recently published a list of 12 Best FMCG Stocks to Buy According to Billionaires. In this article, we are going to take a look at where PepsiCo, Inc. (NASDAQ:PEP) stands against other best FMCG stocks to buy according to billionaires.
Historically, the consumer-packaged-goods (CPG) industry outperformed most of the other industries, mainly due to the high growth and consistent margins, says McKinsey. However, since 2012, numerous factors, such as inflation, market saturation, significant competition, fluctuating consumer tastes and behaviors, along with a fragmented consumer base resulted in growth challenges. Given increased interest rates and elevated industry multiples over the previous few years, there has been lesser deal activity, says the firm. Furthermore, a range of leading CPG companies continue to take a more measured approach, emphasizing midsize deals and aiming to achieve cost and growth synergies.
What Lies Ahead?
The broader downward trend of rates, along with strong, cash-rich balance sheets (and increased capability to take more affordable debt) of CPG companies can result in higher deal activity over the near future for the sector, says McKinsey. The firm expects a mix of 3 types of transactions, i.e., signature, sector-shaping deals, sizable horizontal deals allowing for greater subcategory consolidation, and targeted spin-offs of brands and business units possessing limited synergies or growth enablers with their current owner.
While the consumer sector remains broad, much of the analysis was focused on the F&B sector. McKinsey anticipates to see increased activity throughout CPG sectors, mainly in the personal care and beauty sectors. However, it also expects that the F&B sector might continue to capture a significant share of deals.
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Different Levers for Growth
Deloitte believes that, in 2025, the consumer products companies are likely to address the product portfolio and mix in a bid to entice the consumer and invest across the broad set of demand-generation capabilities. Furthermore, the businesses are projected to develop transformative efficiency so that savings can be produced, which can help finance such investments. Deloitte points out that increasing the unit volume sold remains an important lever that can support in driving profitable growth. Notably, some consumer products companies, mainly the profitable growers, remain focused on innovation to re-engage consumers. Deloitte also highlighted that high-performing companies seem to be adopting a clear-eyed view of their portfolios, and they continue to divest and acquire as needed.
Our Methodology
To list the 12 Best FMCG Stocks to Buy According to Billionaires, we used a screener and Insider Monkey’s exclusive database of billionaire stock holdings to shortlist the companies catering to the broader FMCG space. For the stocks with the same number of billionaire holdings, we have used the number of hedge fund investors as a secondary metric to rank the stocks, as of Q4 2024. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close up of a glass of a refreshing carbonated beverage illustrating the company’s different beverages.
PepsiCo, Inc. (NASDAQ:PEP)
Number of Billionaire Investors: 14
Number of Hedge Fund Holders: 69
PepsiCo, Inc. (NASDAQ:PEP) is engaged in the manufacturing, marketing, distributing, and selling of various beverages and convenient foods. Morningstar believes that the company is expected to benefit from secular tailwinds in the snack business and an integrated business model enabling more effective commercialization. Furthermore, growth initiatives in certain attractive beverage subcategories (such as energy drinks), as well as numerous emerging markets (including Latin America, Africa, and Asia-Pacific), can also fuel its growth prospects. The firm opines that demand for snacks and beverages remains resilient across economic cycles, and a large end-to-end supply chain provides PepsiCo, Inc. (NASDAQ:PEP) better control over execution, supporting its operations from external shocks.
Notably, demographic and lifestyle shifts can drive global snack consumption. Despite the carbonated soft drink volume waning in the mature markets, the diversity of PepsiCo, Inc. (NASDAQ:PEP)’s beverage portfolio can provide growth opportunities across developed and emerging markets. As the company continues to make investments and develop its international presence, it can capture new markets and consumer segments, fueling broad-based revenue growth. PepsiCo, Inc. (NASDAQ:PEP) remains proactive in addressing challenges and capitalizing on opportunities. Its acquisition strategy continues to be a point of interest.
Overall, PEP ranks 6th on our list of best FMCG stocks to buy according to billionaires. While we acknowledge the potential of PEP as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than PEP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
