PepsiCo Pops on Activist Investment
Shares of consumer-staples giant PepsiCo (PEP) rose over the weekend after a well-known activist investor saw a "historic" value opportunity.
Elliott Investment Management, a hedge fund led by billionaire investor Paul Singer, is known for waging brutal activist campaigns – when investors buy large stakes in a company and then advocate for changes to increase the company's value.
Elliott typically specializes in distressed-debt investments... It once hired arranged for the capture of an Argentine Navy ship as compensation for the country's missed bond payments.
It also goes after well-known companies in need of change... When Elliott wanted to remove the CEO of health care technology company Athenahealth, the firm created a presentation with a chart of Athena's stock price tagged with pictures from the CEO's Instagram account that showed him sailing and drinking. The CEO eventually resigned.
Last year, Elliott took a large position in Starbucks (SBUX) and played a role in replacing its chief executive.
Now, Elliott has its sights on PepsiCo's struggling stock. As of last Friday's close, PEP shares are down 2.7% this year while the overall market is up 9.5%.
Elliott's stake in PepsiCo is about $4 billion, making the firm one of PepsiCo's biggest investors.
Two weeks ago, I (Jeff Havenstein) talked about the value in the consumer-staples sector, like Clorox (CLX) and General Mills (GIS)... You can add PepsiCo to that list.
Most of you know the powerful brands that PepsiCo houses.
In its packaged food division, it owns Lay's, Cheetos, Ruffles, Doritos, SunChips, Sabra hummus, Quaker, and many more.
For beverages, it owns its namesake Pepsi along with Mountain Dew, Gatorade, Bubly sparkling water, Aquafina, Pure Leaf iced tea, Muscle Milk, and Propel, among others.
These are household names. Walk into any gas station and you'll see PepsiCo products flooding the shelves and refrigerators.
But PepsiCo has been out of favor with investors lately amid changing consumer preferences. There has been more demand for healthier snacks and drinks. More competition has led to a decrease in PepsiCo's market share.
The stock trades for less than 20 times earnings and 2.3 times sales, well below the market average.
But Elliott believes in PepsiCo's brands and operations. It said, "The path back to winning is clear and achievable."
According to the Wall Street Journal, Elliott sent a letter to PepsiCo's board with ideas to boost the stock price by at least 50%. From the Wall Street Journal...
It suggested PepsiCo consider refranchising its bottling network, leaving ownership in the hands of local and independent bottlers. (Rival Coca-Cola completed a large-scale refranchising initiative in 2017. The Fanta and Powerade owner now has a market value of nearly $300 billion, with its share price near all-time highs.)
Elliott also encouraged PepsiCo to review both its beverage and food offerings and eliminate those that don't sell well. The firm also said PepsiCo should provide investors with more specific plans to improve its results.
PepsiCo said it was open to Elliott's suggestions.
I've long been a fan of PepsiCo. Sure, its brands are time-tested. But its real advantage is its global distribution system.
Any time PepsiCo has a new product, the company can quickly spread it across supermarket shelves, vending machines, and restaurant menus. This allows PepsiCo to respond quickly to changing consumer preferences.
Also, our proprietary Stansberry Score likes PepsiCo.
The score is based on four main factors: capital efficiency (the hallmark of Stansberry Research), financials, valuation, and momentum – with momentum being the smallest factor.
Each stock in our database gets a score, ranging from 0 to 100. Anything above 80 is considered a fantastic opportunity.
Today, PepsiCo gets a Stansberry Score of 80, with B grades for financial and valuation, and an A for capital efficiency. Take a look...
In the end, Elliott sees a great company ready to get back to growth. This is a massive investment, and the market is cheering it.
Consider betting alongside Elliott if you don't already own PepsiCo.
What We're Reading...
- Did you miss it? These two giants are trading for decade-low valuations.
- Something different: Nestle plunged into turmoil as CEO fired over undisclosed relationship.
Here's to our health, wealth, and a great retirement,
Jeff Havenstein
September 3, 2025