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5. PepsiCo ( PEP)

Company Profile: Pepsi is a global food, snack and beverage company. Its brands include Pepsi, Mountain Dew, Tropicana, Gatorade, Lay's, Doritos and Lipton.

Current Share Price: $69.92 (May 11)

Potential Upside: 17% based on a price target of $82

Morgan Stanley's Take: Analyst Dara Mohsenian notes that Pepsi's stock underperformed in the second half of 2010, but adds that it's trading at a discount on a number of historical measures. Mohsenian says the multiple on Pepsi's stock should "continue to expand as investors become more comfortable with full-year earnings-per-share visibility."

Pepsi currently has a forward price-to-earnings multiple of 14, a slight discount to the S&P 500 as well as rival Coca-Cola ( KO).


4. Honeywell ( HON)

Company Profile: Honeywell is a conglomerate that makes security technologies, automotive products and chemicals.

Current Share Price: $61.40 (May 11)

Potential Upside: 22% based on a price target of $75

Morgan Stanley's Take: Analyst Scott Davis trumpets Honeywell's safety-products business, noting that personal protection equipment (PPE) is a $20 billion industry growing at twice the rate of gross domestic product. "The business is just 6% of Honeywell's overall sales but is growing fast," Davis writes.

"With about 10% market share, Honeywell is the leader along with 3M ( MMM), but the industry is still fragmented and could offer plenty of room for growth via acquisitions," Davis adds.

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