John Reese
This column was originally published on RealMoney on March 5 at 7:05 a.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.
The stock market, like life, can be filled with ironies. Warren Buffett's long-term love affair with Coca-Cola (KO Quote - Cramer on KO - Stock Picks) is well known. His investment vehicle, Berkshire Hathaway (BRKA Quote - Cramer on BRKA - Stock Picks), has owned Coke stock for decades. Until last year, Buffett himself sat on Coke's board. But when I look at him, or at least, when I'm using my strategy based on his approach to investing, I see all the bubbles going Pepsi's way. According to my analysis, Coke's archrival PepsiCo (PEP Quote - Cramer on PEP - Stock Picks) meets the Buffett strategy's criteria for buying, while Coke has gone flat. Not surprisingly, things aren't also as simple as black vs. white, or Coke vs. Pepsi. The complication here is that while the two are fierce competitors in the drink marketplace (Coke vs. Pepsi, Sprite vs. Mountain Dew, Dasani vs. Aquafina, Minute Maid vs. Tropicana, Diet Coke vs. Diet Pepsi), drinks only provide about 37% of PepsiCo's business. The bulk of the rest (nearly 60%) comes from a market Coke doesn't even seriously compete in, namely, salty snacks. PepsiCo's biggest business is its Frito-Lay division, which makes Lay's, Fritos, Ruffles and Doritos. As tasty as the irony of the Buffett strategy favoring Pepsi over Coke may be, the more important factor is that it is telling investors that this is a good time to take a gulp of PepsiCo. Plus, there's a second guru strategy, based on the writings of Peter Lynch, which also thinks PepsiCo is the current generational leader. First, let's look at what the Buffett has to say about the company.
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