What's putting the pep back in PepsiCo?
According to wealth manager Mark Tepper, PepsiCo — the global conglomerate behind brands like Pepsi, Mountain Dew and Tropicana — has a secret ingredient in its snacks unit that could its stock the boost it needs.
"Most people think beverages when they think Pepsi, but, actually, our favorite business within Pepsi is Frito-Lay," Tepper, who is president and CEO of Strategic Wealth Partners, said Wednesday on CNBC's "Trading Nation." "Snacks is a theme worth playing, and Frito-Lay is a giant that's going to drive near-term performance for them."
When it comes to the broader consumer staples sector, however — which has fallen over 1% since General Mills reported a disappointing quarter Wednesday morning — Tepper wasn't nearly as bullish.
"From a valuation standpoint, it's really tough to get excited about consumer staples," he said, adding that investors are paying roughly 2.5 times more for a sector "that's growing at a quarter of the pace of the broad[er] market."
Worse, "if you get a trade deal, you're going to see money rotate out of staples and into cyclicals just as fast as the money rotated in," Tepper warned. "So, I wouldn't be buying the sector. I'd look for specific names."
For Tepper, General Mills wasn't one of those names. As of Thursday's opening bell, the stock had shed more than 4% following its fiscal fourth-quarter earnings report, in which declining sales and volumes emerged as key issues.
But Bill Baruch, founder and president of commodities trading firm Blue Line Futures, came out slightly more positive on the consumer staples sector, even as he agreed that General Mills was seeing severe underperformance.
"I still love XLP. I love this sector," Baruch said in the same interview. "The global growth data here in the U.S. as well as the globe is not really that great right now, and I think that favors the defensive sector."
Baruch, who focuses on technical movements, also liked the look of the consumer staples sector's chart, which showed the group breaking out above a key trend line, retesting it, and proceeding to head higher.
"I think you have a great floor to be long from in [the consumer staples sector] at 55" dollars, where the trend line is now, Baruch said, referring to the Consumer Staples Select Sector SPDR Fund. "So, I'm long from 55 and if it breaks down below there."
Thursday morning saw more pain in the sector, with Chef Boyardee parent Conagra Brands falling 8% and spice maker McCormick shedding more than 1% after their respective earnings reports.
