Shares of PepsiCo Inc (PEP) have had a rough 3 months, with the share price down -13.34%, and it has been flat for the better part of 3 years with a return of -2.39%. While shareholders are not down much, especially given that the 5-year return is +3.62%, the real issue with owning PEP is the opportunity cost, given the alternative of the deployed capital. This is the basis of the analytics at SIACharts, where advisors prefer to own the outperforming names. In the first table presented, we can see the full list of SIA Reports in which PEP is included, and it is notable that it is Unfavored in every report. Within the SIA S&P 100 Index Report, PEP is positioned at #96, while on the SIA S&P 500, it resides in position #460. SIACharts’ relative strength rankings help advisors identify opportunities in stocks that are outperforming their peers or index benchmarks on a relative basis. Outperformance often reflects improving investor expectations for a strong company or sector’s growth, but this can also be said in the opposite way, where SIA's preference is to avoid relatively underperforming names. In the first chart presented, we have established a long-term chart to further illustrate this point, where the SIA matrix overlay tool is engaged. It is observable that for most of PEP's trading over the past 14 years, it has been a relative underperformer. Yes, the price of the stock does rise through time, but this means it does not rise as quickly as other names within the same index report, which, in this case, is the SIA S&P 100 Index Report. Currently, under selling pressure in the past 3 months, shares are approaching the first level of support at $140.47, a level that, if broken, may set the stage for a move down to the next support at $127.23. To the upside, resistance begins on the point-and-figure chart at the 3-box reversal level at $155.09, and further up at $178.15. That said, any prior rally has been met with a series of lower lows, highlighted by the red downtrend line, so any reversal past this line would be a notable improvement. In the meantime, PEP shares sit within an SIA Unfavored sector of Food and Beverages and also have a negative SMAX score, which further illustrates its relative underperformance, this time against a basket of alternative asset classes.
The next chart is a comparison of Pepsi vs. Coke, where we can see that PEP is trading negatively to COKE, with a slope that appears to be steepening. Remember, this isn't to say that COKE itself is an outperformer, but rather that PEP is underperforming COKE. Now, imagine this exercise being done thousands of times each day with the entirety of the SIACharts database to establish PEP's overall position within the reports. This underperformance is undeniable and is the basis of the work we do at SIA. If you would like to know more about the mechanics that underlie our powerful platform, please reach out to our SIA account managers, and we would be happy to explain this powerful system.
Disclaimer: SIACharts Inc. specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investors investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIACharts Inc. nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.
