Bellying Up to the Bowl

 | Feb 03, 2013 | 12:00 PM EST  | Comments
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Stock quotes in this article:

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pep

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bud

While no Super Bowl event would be complete without snacks and drinks, shares of the companies that make these products usually aren't big price leaders. Keep in mind, however, that even the best price gainers in any given market cycle are not necessarily stocks that should be held over the medium or long term.

One example of a snack-food name is Diamond Foods (DMND), whose products include Kettle brand chips and Emerald nuts. But the stock itself never recovered from an accounting scandal that broke in September 2011.

The company has a new management team these days, but it still faces the task of restoring investor confidence. In the wake of the accounting problems, Diamond lost an opportunity to buy the Pringles potato-chip brand from Procter & Gamble (PG). Diamond slashed its advertising budget, and year-over-year sales growth has suffered in the past three quarters.

I'm a fan of Kettle chips, but not of this stock. It currently sits 56% below its 52-week high, and is best left out of any festive bout of stock buying.

A far better snack-maker to take a bite out of is Pepsico (PEP). Naturally, most people think of the company's beverages first, but Pepsi also makes Doritos, Fritos, Lay's and Ruffles.

Of course, Pepsi's Super Bowl ads are always eagerly anticipated, and this year is no exception. The company is also sponsoring this year's halftime show, which will star Beyoncé. The S&P 500 component is within striking distance of its August 52-week high of $73.66. Pepsi shares closed Thursday at $72.85, having pulled back along with the benchmark index.

The company is scheduled to report its fourth-quarter earnings results on Feb. 14 before the bell. Analysts have pegged income at $1.05 per share on revenue of $19.7 billion. Those would both represent year-over-year declines.

While the sales and earnings momentum has been slowing, other metrics, such as return on equity and free cash flow per share growth, remain robust. In addition, Pepsico's dividend yield is 3%, which is why many investors choose to hold the stock rather than treat it as a trading vehicle.

When it comes to the traditional Super Bowl Sunday beverage of choice, Americans reach for the brews of some companies headquartered overseas.

One of those, Belgium-based Anheuser-Busch InBev (BUD), plunged nearly 6% Thursday after the Justice Department put the kibosh on the company's move to buy Corona maker Grupo Modelo. The deal had been expected to close in the first quarter.

While the stock is clearly in need of some Clydesdales to pull it out of the morass, all the news about Thursday's plummet was not bad. The stock got support above its 50-day moving average, which indicates that investors see reason to stay in the stock, rather than bail out, despite the news. In the coming sessions, watch Anheuser-Busch's moving-average support for more signals about the level of institutional investor confidence.

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