$PEP overpaid for its stake in $CELH
Background

Recently, CNBC reported that PepsiCo took a $550 million stake in Celsius. In this deal, PepsiCo will help Celsius gain more shelf space in existing retailers and expand more into independent stores (i.e. gas stations). At the same time, PepsiCo gets an 8.5% stake in Celsius.

During the early days of the pandemic, PepsiCo bought out energy drink maker Rockstar to diversify its beverage portfolio outside of soda. Since Celsius recently overtook Rockstar in popularity, PepsiCo sees its stake in Celsius as a way to hedge against a potentially lousy buyout deal.

There have been rumors that $PEP could see itself acquiring $MNST, but those rumors disappeared recently when PepsiCo chose to invest in Monster Energy's rival, Celsius.

The issue with the deal

$CELH is currently trading with a PE of 783.75. Basically, PepsiCo acquired its stake at nosebleed valuations. Being a company whose products recently became popular, it's hard to tell whether their products will continue to be popular among consumers or prove to be a fad.

Another concern with Celsius is that its internal controls are "materially weak". The weakness of their internal controls makes the company's financials ripe for fraud. Hopefully, PepsiCo's deal with Celsius won't resemble General Motors's deal with Nikola under the leadership of Trevor Milton.

Even if the company is hiring accountants with decades of experience and is working with their auditors to improve their internal controls, there's a strong risk that the company might have to restate their financials and those restatements could show that their revenues are a lot lower than what was originally reported.

My concluding thoughts

The Celsius deal doesn't mean much to PepsiCo considering that it has other bets to bank on for growth, like their partnership with $BYND and its numerous investments in expanding recycling access and making its bottles 100% recyclable will give the company access to more consistent pricing on plastic overall as it looks to buy the plastic directly form recycling centers rather than from producers of plastic.

This company will continue to pay dividends and raise prices alongside inflation.
I am not sure valuing Celsius on a price to earnings ratio is warranted, but tend to agree with the conclusion all the same. Their operation in China lacks the disclosure I would like as an investor, regardless of how popular the drink is.

That said, Pepsi is huge and can afford the risks.
View 1 more comment
Leon's avatar
$18.4m follower assets
Portfolio end of June '22 (descending order)
stocks:

Epsilon Net Group $EPSIL.AT
Secunet Security Networks $YSN.DE
Evolution $EVVTY
Leatt Corp. $LEAT
Kaspi $KSPI
Grodno SA $GRN.WA
Amazon $AMZN
Meta $META
Media and Games Invest $MDGIF
Alphabet $GOOG
Centrotec SE $CEV.HM
IDT Corp. $IDT
Vow AsA $VOW.OL
Digital Turbine $APPS
Tremor International $TRMR
Passus SA $PAS.WA
Booking Holdings $BKNG
Steico SE $ST5.DE
Kambi $KAMBI
Mynaric $MYNA
Unity Software $U
Tencent Holdings $TCEHY
Alibaba Group $BABA
Nvidia $NVDA
SEA Ltd. $SE
Adobe $ADBE
Monster Beverage $MNST
Spotify $SPOT

New: $CEV.HM. Sold: $INPST

Crypto:

Ethereum $ETH.X
Bitcoin $BTC.X
Litecoin $LTC.X
Yield Guild Games $YGG.X
Enjin $ENJ.X
IOTA $MIOTA.X
Cardano $ADA.X
Bitcoin Cash $BCH.X
Polkadot $DOT.X
Leandro's avatar
$134.5m follower assets
The Agony of High Returns
1/ Just read Morgan Housel's article: "The Agony of High Returns."

The article basically goes over what an investor must face in the chase of high returns and is pretty graphical showing how the best performing stocks came with quite a deal of pain for holders.

Some quotes that stood out to me 👇🏻

"It's hard to grasp how the best-performing stock of the last 20 years could spend the majority of its time with returns that would make you want to vomit."

$MNST suffered 4 separate +50% drops, lost more than 2/3s of its value twice and more than 3/4s once.

"On the way to making serious money, you spend a lot of time losing serious money. It's a reality anyone investing in stocks, no matter what you own, has to face."

This table shows how the best 10 stocks to hold from 1995 to 2015 fared. It's not pretty:

"What now looks like a slam-dunk story was, at any given time in the last 20 years, an easy story to criticize. That's why shares were so volatile."

"Capitalism is fierce about denying you something for nothing, and higher returns tend to demand the mental agony of higher volatility."

post media
Could anybody with insight and opinions on the Fed's tapering help me please?
I'm going round in circles with it.

The Federal Reserve is finally going to start tapering. My understanding is that this will help reduce inflation (less money entering circulation) and will therefore reduce prices and encourage spending, meaning value Cyclicals are a pretty good bet at the moment?

However, by reducing its bond purchases, banks will lose that source of revenue and will need to make it up elsewhere, such as increasing their own interest rates to consumers therefore leaving them with less money to spend.

My over-arching 'feel' is that this will benefit consumers and they will therefore spend more. So I've found a few consumer-oriented businesses with good technicals that meet my trading rules: $WGO, $CHWY, $WOOF, $RDFN, and $MNST (though earnings proximity scares me).

I appreciate I have massively over-simplified the effects of quantitive easing here but is the jist of it correct or am I massively off the mark?
Might be worth keeping in mind that the Fed is often late and winds up being overly aggressive (historically) in removing the monetary punch bowl. Additionally, stocks tend to do OK despite the Fed hiking rates until about the 4th increase (we're a long way from there). It's also interesting to note that small cap stocks tend to perform well during periods of rising interest rates. And you might find this link to a graphic showing sectors that do best during periods of the business cycle helpful: https://eresearch.fidelity.com/eresearch/markets_sectors/sectors/si_business_cycle.jhtml?tab=sibusiness
View 11 more comments
Eric Pelnik's avatar
$286.4m follower assets
Earnings this week
📞Which calls are you most excited about?

Monday, August 2nd
$ZI ZoomInfo Technologies

Tuesday, August 3rd
$APRN Blue Apron
$BHG Bright Health Group
$NKLA Nikola
$CWH Camping World
$PGR Progressive
$COUR Coursera
$CRSR Corsair Gaming
$SKLZ Skillz

Wednesday, August 4th
$LMND Lemonade
$MVIS Microvision
$WYNN Wynn Resorts
$ROKU Roku

Thursday, August 5th
$HEAR Turtle Beach
$MNST Monster Beverage
$CFLT Confluent
$CWK Cushman & Wakefield
$DOCN DigitalOcean
$EB Eventbrite
$FSR Fisker
$FNKO Funko
$FVRR Fiverr
$SPCE Virgin Galactic
$FROG JFrog
$MRNA Moderna
$SQ Square

Friday, August 6th
$TWST Twist Biosciences
$CRON Cronos Group
$DKNG DraftKings

Sources: Business Insider, Google Finance, Yahoo Finance
$SQ for me, one of my important investments, $ZI mainly because they are headquartered about a 5 minute walk from my apartment. Also because I've looked at this stock and wonder how well they will continue to do in the coming years.
View 3 more comments
Eric Pelnik's avatar
$286.4m follower assets
Earnings this week
📞 Which calls are you most excited about?

Monday, May 3rd
$APPF AppFolio
$CAR Avis Budget Group
$IRBT iRobot
$CHGG Chegg
$EL Estee Lauder
$ZI ZoomInfo Technologies
$MELI Mercadolibre

Tuesday, May 4th
$ATVI Activision Blizzard
$UAA Under Armour
$APO Apollo Global Management
$AKAM Akamai Technologies
$AYX Alteryx
$WMG Warner Music Group
$CVS CVS Health
$MPC Marathon Petroleum
$MCFE Mcafee Corp
$KKR KKR & Co
$TRI Thomson Reuters
$D Dominion Energy
$ESPR Esperion Therapeutics
$ZG Zillow Group
$SPCE Virgin Galactic
$MTCH Match Group
$LYFT Lyft
$PFE Pfizer
$UPWK Upwork
$SPT Sprout Social
$WYNN Wynn Resorts

Wednesday, May 5th
$TUP Tupperware Brands
$BKNG Booking Holdings
$SMG Scotts Miracle-Gro
$RDFN Redfin
$GM General Motors
$ELY Callaway Golf
$ETSY Etsy
$FSLY Fastly
$GDDY GoDaddy
$HUBS HubSpot
$PYPL PayPal
$TWLO Twilio
$ZNGA Zynga

Thursday, May 6th
$APRN Blue Apron
$TWST Twist Bioscience
$BYND Beyond Meat
$BL BlackLine
$MNST Monster Beverage
$BILL Bill.com
$CVNA Carvana
$NET Cloudflare
$DDOG Datadog
$DBX Dropbox
$EXPE Expedia
$EB Eventbrite
$FVRR Fiverr
$FNF Fidelity
$FNKO Funko
$GRPN Groupon
$GPRO GoPro
$MHK Mohawk
$W Wayfair
$SHAK Shake Shack
$PZZA Papa John's
$YELP Yelp
$MRNA Moderna
$VIAC ViacomCBS
$SQ Square
$PTON Peloton
$ROKU Roku
$FROG JFrog

Friday, May 7th
$CNK Cinemark
$DKNG Draftkings

Sources: Business Insider, Google Finance, and Yahoo Finance
Very excited for Peloton. Especially to see if they announce any new products and how their guidance over the next year looks
View 5 more comments
Next
Commonstock is a social network that amplifies the knowledge of the best investors, verified by actual track records for signal over noise. Community members can link their existing brokerage accounts and share their real time portfolio, performance and trades (by percent only, dollar amounts never shared). Commonstock is not a brokerage, but a social layer on top of existing brokerages helping to create more engaged and informed investors.