FEMSA Comes Through Again

FEMSA's (NYSE:FMX) third quarter wasn't flawless, but it was a good quarter that showed ongoing progress in most of the initiatives that matter most to management and to the creation of shareholder value. While the "will they/won't they?" with the Heineken stake is likely to drag on, there are a lot of irons in the fire with Coca-Coca FEMSA (NYSE:KOF) and plenty of growth opportunities for the retail operation.

I haven't made too many meaningful changes to my model, and most of the change in my fair value calculation come from changes in the value of the Heineken stake (which I value at current prices) and exchange rates. With a fair value of $103 and a runway to several years of above-average growth, I believe FEMSA is worth considering as a buy candidate, particularly on the frequent pullbacks that seem to come with these shares.

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FEMSA Comes Through Again

Seeking Alpha: Economic Worries Weigh On FEMSA

Mexican consumer conglomerate FEMSA (NYSE:FMX) hasn't had a great 2014, as analysts and investors have continued to worry about the impact of new taxes and a sluggish economic recovery on Mexican consumers. Insofar as the things under FEMSA management's control go, however, 2014 has been a decent year and the company continues to offer a solid investment case as a good play on Mexico's economy and a long-term profitable redeployment of capital.

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Economic Worries Weigh On FEMSA

The Motley Fool: FEMSA Hopes to Put a Tough Year Behind It

The past year was not a particularly strong one in the consumer sectors of Latin American countries like Mexico and Brazil, and that was not good news for FEMSA (NYSE: FMX  ) . One of Mexico's largest corporations, FEMSA has a significant presence in the retail/consumer world with its stake in Coca-Cola FEMSA (NYSE: KOF  ) , a large Latin American Coca-Cola bottler, a 20% stake in brewer Heineken, and ownership of Oxxo, the third-largest retailer in Mexico.

The challenge for investors is weighing out the short-term challenges presented by a possibly improving (but not yet strong) Mexican economy, new taxes, economic problems in Argentina and Venezuela, and competition against the long-term opportunity of growing Coca-Cola FEMSA and leveraging the retail operations into new areas like pharmacies and fast food that are still underpenetrated in Mexico.

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FEMSA Hopes to Put a Tough Year Behind It

Investopedia: PepsiCo Has Caught Up, Now It Needs To Outperform

Even though PepsiCo (NYSE:PEP) is routinely lashed for not being Coca-Cola (NYSE:KO), I wrote earlier in this year that I thought the stock's relative undervaluation to the increasingly overvalued packaged food sector seemed out of line. Since then, PepsiCo has closed the gap with the likes of Coca-Cola, Mondelez (Nasdaq:MDLZ), and Kellogg (NYSE:K) as the shares have underperformed the S&P 500 by a smaller amount.

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Investopedia: Coca-Cola's OK Results Won't KO The Stock

Coca-Cola (NYSE:KO) is pretty nearly bulletproof, so a so-so fourth quarter report and unexciting guidance won't likely change anything. For investors who like Coca-Cola, nothing has really changed about the long-term opportunities in selling sugar water to the world; and for the bears on Coca-Cola, the shares will still look pricey relative to the expected cash flow growth.

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http://www.investopedia.com/stock-analysis/2013/Coca-Colas-OK-Results-Wont-KO-The-Stock-KO-PEP-MNST-KOF0214.aspx

Investopedia: If You're Going To Overpay For A Food Stock, Why Not Heinz?

I tend to believe that Wall Street overvalues the supposed stability of packaged/branded food and beverage companies, which is why investors seldom have the chance to buy the stocks of Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP) or Kellogg (NYSE:K) at really compelling valuations. Within the broader group of expensive food names, I can see an argument for owning Heinz (NYSE:HNZ) today. Not only is Heinz doing relatively well from an organic growth standpoint, but the combination of strong brands in developed markets and a very good presence in emerging markets is compelling to me.

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Investopedia: PepsiCo Shows That Snacks And Sodas Aren't Bulletproof

As seems to be the case with Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP) is not presently delivering the sort of results that its premium valuation would seem to demand. Certainly some of this can be tied to investor confidence - Coca-Cola and PepsiCo may wobble from time to time, but they eventually get their affairs in order and get back to the business of wringing above-average profits from strong global brands. That said, while I do believe PepsiCo has some good things going for it, I see no reason to pay up for the stock today.

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Investopedia: The Long-Tail Value Of Supreme Brands

The way tech companies like Apple (Nasdaq:AAPL) and drug companies like Pfizer (NYSE:PFE) fight to defend their patents, you'd think that success in business is impossible unless you can lock up your best ideas behind walls of patents and copyrights. While these legal protections for innovation are indeed important, a host of companies have demonstrated that there are considerable rewards to be wrung from brands and reputations protected by little more than the consumer's ongoing preference for the real McCoy and the value of the trademark.

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Investopedia: Diageo Lives Up To Its Billing

I may not love the premiums that alcoholic beverage companies carry today, but I can't fault the underlying premise that these companies pay for their multiples with solid and relatively consistent performance. To that end, while British alcohol giant Diageo (NYSE:DEO) saw some modest erosion in second half growth, the company's performance continues to offer both a port in a storm and leverage to emerging market growth. Once again, though, the question is whether investors ought to pay up for it.

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Investopedia: Change Is Coming At PepsiCo, One Way Or Another

It is interesting how Wall Street will seem to reward companies that are, in many respects, underperformers. One such example is the relative valuation between Coca-Cola (NYSE:KO) and PepsiCo (NYSE:PEP). Relative to the possible future cash flow streams, the companies seem roughly equally valued, even though Coca-Cola is in most relevant respects the superior operator. What that tells me is that the Street already assumes that PepsiCo's restructuring efforts will either succeed or that the company will take more dramatic steps, including a potential break-up.

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Investopedia: Bull Vs. Bear - Olympic Advertising Is A Waste Of Shareholders' Money

Question: Are the Olympics worth the money spent on marketing by corporate sponsors?

Bear's Response
Commercial sponsorship is a huge part of the "Olympic experience." Not only do corporate sponsors go a long way toward defraying the cost of an Olympics, but "in kind" payment of services and products can make the games run more smoothly. The question, though, is whether these companies get an adequate return on their money. I believe they do not.

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Investopedia: Do Nike's Earnings Have Broader Meaning On China?

Nike (NYSE:NKE) is often as near as what comes to a bulletproof stock - the company's brand is known all over the world, management runs the company with high efficiency and results are generally reasonably predictable. Occasionally, a little gap in the armor appears and patient investors have an opportunity to buy shares at a reasonable price. Nowadays it looks like Nike's "China problem" may be just such a gap.

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Investopedia: Nestle Almost Never On Sale

Swiss food giant Nestle (OTCBB:NSRGY) has a well-earned reputation for excellence, and the Street has long been happy to pay a premium for that performance. That's all well and good for those who own shares, but it makes waiting around for an opportunity to buy a bit frustrating. With the stock still trading at a hefty premium, investors can find better deals in the food sector.

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http://stocks.investopedia.com/stock-analysis/2012/Nestle-Almost-Never-On-Sale-NSRGY-ABT-MJN-KO0424.aspx

Investopedia: Central European Distribution Still A Mess

Investors don't have to search especially hard for evidence that liquor and spirits businesses can be ludicrously profitable if run well. Unfortunately, Central European Distribution (Nasdaq:CEDC) shows quite clearly what happens when a business is over leveraged and not run especially well. While there is definitely value in this business, it is very much an open question as to how much (if any) of this value will reach shareholders.

Another Messy Quarter
For a company that may have legitimate "going concern" issues, CEDC's fourth quarter wasn't really all that bad. That said, it was fairly confusing.

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Investopedia: PepsiCo Needs To Go Further

An eye on the future is all well and good, but Wall Street will pay relatively little for it if they fear that near-term execution will suffer as a result. Although PepsiCo's (NYSE:PEP) decisions in recent years to prioritize healthier foods may make sense in a world increasingly hostile to sodas and salty snacks, the fact remains that many analysts and investors are much more concerned about the the pace of share erosion today. Although PepsiCo's restructuring efforts announced with fourth quarter earnings are logical, there's a real risk that it's too little, too late.


Q4 On Target 
PepsiCo didn't deliver too many surprises for the fourth quarter. Revenue rose 11% as reported and slightly surpassed the averaged analyst estimate. Real growth was more on the order of around 9%, though, as an extra week and foreign exchange both impacted reported results.


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Investopedia: Can Diageo Keep The Party Going?

Right now is a pretty good time to have a global business with valued brands and pricing power. Recent years have proven that demand for spirits is not as inelastic as once conjectured, but Diageo (NYSE:DEO) has nevertheless been a popular stock in a nervous market. Curiously, even as the investors in 2012 have shown more interest in risky names, Diageo has maintained its momentum. The question for investors is how much room is left in this run.

A Strong Fiscal First Half  
So far, so good when it comes to Diageo's relatively ambitious targets for 2012. Organic revenue grew 7% for the first half and while the quarter-by-quarter performance was a little unbalanced (almost twice as much growth in the first quarter), underlying growth was consistent in both. As was the case for Coca-Cola (NYSE:KO) and PepsiCo (NYSE:PEP), 3% volume growth seems like the magic number this quarter.

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Seeking Alpha: FEMSA Richly Valued, But Rich In Growth Opportunities

Like most other emerging markets, 2011 was a disappointing year for Mexico. Despite a drop of worse than 20% in the Bolsa, consumer products concern FEMSA (FMX) had a quite a strong year. While FEMSA's stock is no longer a bargain, patient investors may yet see further growth in the company's core OXXO franchise as well as new growth initiatives and capital redeployments that could build meaningful long-term value.

The Future In C-Stores
Although FEMSA's interests in Coca-Cola FEMSA (KOF) and Heineken are nothing to ignore, the company's OXXO convenience store franchise is really the story right now. With over 9,000 stores and about 5% share of Mexico's food and convenience retail market, OXXO is the dominant C-store franchise in Mexico and one of the most profitable retailers in the region – surpassing the likes of WalMex (WMMVY.PK), Cencosud, and CBD (CBD).

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FEMSA Richly Valued, But Rich In Growth Opportunities

Investopedia: Ups And Downs Par For The Course At ADM

Archer Daniels Midland (NYSE:ADM) is a good example of what is wrong about Wall Street today. In the short-term world of sell-side research and institutional investors, there is a great deal of angst over quarter-to-quarter moves and the volatility of commodity prices. Here's the long-term reality, though: processed food is here to stay and ready to explode in emerging markets, agricultural refining is an industry that rewards scale and ADM is one of the biggest fish in the ocean. (For more, check out What Is An Emerging Market Economy?)

A Tough Third Quarter  

ADM reported the sort of quarter that will have some investors doing double-takes. After all, 30% reported net sales growth seems amazing, for a company of this size. Reported growth was strong across the board: oilseed processing revenue rose 29%, corn processing revenue rose 51% and ag services revenue rose 33%.

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http://stocks.investopedia.com/stock-analysis/2011/Ups-And-Downs-Par-For-The-Course-At-ADM-ADM-BG-CPO-ANDE-CZZ-KO-PEP-GIS1107.aspx

Investopedia: PepsiCo Really Close Now

If there's anything good about widespread market routes, it's that they can often bring expensive stocks back to a more palatable price. That's perhaps the most significant takeaway from PepsiCo's (NYSE:PEP) third quarter earnings; while business continues to move along apace, the stock is finally at a point where long-term investors may see some real value.


A Decent Fiscal Third Quarter 
The market seemed to be girding itself for a bad performance, but PepsiCo did alright. Revenue rose more than 13% as reported, with organic growth in excess of 5%. With worldwide organic snack volume growth of 3%, and beverage volume growth of 1%. It's clear that Pepsi products are still finding their way into shopping carts, but the company hasn't really pushed as hard on pricing as other food and beverage companies.


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Investopedia: Berkshire Buys Shares And Controversy

Such is the cult of attention around Berkshire Hathaway (NYSE:BRK.A) and its CEO Warren Buffett that he probably cannot have dinner without a dozen financial columnists debating the merits of him choosing beef, pork or chicken. With Monday's announcement that the company has authorized a share buyback that could be worth close to $30 billion or more, there is rampant second-guessing about the decision and numerous attempts to divine some further meaning in the move.

The Buyback to Be
Buffett has commented in the past that a buyback would only make sense if the shares of Berkshire Hathaway were significantly undervalued and there were no better apparent uses of the company's cash. Apparently both conditions are true in the market today.


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