It's not easy to be "old school" these days when you are a student of stocks. It's not easy because you are being driven crazy, tortured even, by the new school, the school of no consequence and no repercussions. The school of earnings reportage.
What do I mean by old school?
Let's take the stock of PepsiCo (PEP) , which reported this very morning here on Thursday.
Here's a storied company that I have been studying for years through all sorts of iterations. I remember when it accumulated restaurants in the '90s and I loved it. What a natural it was to sell Pepsi instead of Coke at its own stores, stores such as Taco Bell, KFC and Pizza Hut. They were all in their early growth phases. Brilliant.
Then I remember when they spun the restaurants off, as in who needed those three restaurant companies, Tricon or Yum (YUM) or whatever they were called in their topping-out phase. Who cares where Pepsi is sold.
I recall 20 years ago when PepsiCo bought Quaker Oats so it could own the sport drink business with the fabulous Gatorade franchise. Huge win. Immediate growth, replacing the sagging restaurant group revenues.
I remember tussling with the company more than a decade ago when nobody ate the Fritos at an overnight party I threw for my daughter and her swim team, the Hilltoppers at Summit High in New Jersey. I said maybe it was dead. The company told me to go do some homework and see what they were doing in good-for-you snacks at their Aberdeen Maryland Proving Ground plant, a plant, by the way, that was closed loop, before I even knew what that was.I went. I saw. PepsiCo conquered.
I struggled to learn about sustainability from their brilliant former CEO, Indra Nooyi, and why it even mattered. She was years ahead of her time. Now everyone cares. They are still learning from her even as she retired in 2018.
Every time I have written this company off it has reinvented itself, bought something, spun something off, created something, divested something, boosted something, slimmed something. And almost every time it has been right.
So the one thing I know to do is not to jump to conclusions the moment the company reports its numbers. I like to speak to Hugh Johnston, the strong, steady chief financial officer, not once, but twice. I like to listen to the conference call. Read the notes. Ponder the divisions. Cross check them versus expectations, mull the trajectory of new products, judge shelf space versus Coca-Cola (KO) and figure out where the marginal dollar is best spent. All before I say a word about the darned stock.
And you know what that makes me? A card-carrying dinosaur. Someone who is so out of step with the determination of a stock price short term that I am an embarrassment, at least for 90 seconds of my life each quarter.
Why 90 seconds? Because that's exactly how long it takes to write and then read the stories that different services come out with about how the last 90 days of the life of PepsiCo were. I don't want to pick on anyone by name, but the first story I read said that PepsiCo's profit plunged by 74% as the tax boost fades.
If you follow this company for more than 10 minutes -- which is obviously more than the writer did -- you would know that you judge PepsiCo by core earnings, which were better than expected, not tax-aided earnings, which are irrelevant. If you didn't know better, you'd sell the stock, which had gone out at $146; maybe you would sell it down to $130? Maybe lower?
Next story? "Pepsico misses on weaker carbonated numbers." Here's a missive that sent the stock down seconds after it came out. I know it scared me. It had me scurrying through the release and talking to the CFO about what I missed. The answer? Nothing. The story was taken down a few minutes later. Totally inaccurate.
Then you got a bevy of stories about how PepsiCo sees a weaker 2020. These were simply whole cloth. Nowhere did they see that. Finally, we had to read a bunch of stories about slowing organic growth. How is that possible? They did exactly the organic growth they said they would over and over and over again.
I could go on and on. What matters, what you need to know, is that I have read these negative -- and wrong -- stories ever since everything got automated (I swear there can't be any real people behind these moronic pieces) and they have cost you, by this point, billions if you ran big money and paid attention to them.
My advice? Guys like me? We may look like dinosaurs. Nevertheless, after this inaccuracy-filled morning, maybe we're not. Maybe we're tortoises. We can't stamp out the hares. But we do get to win the race.
