Investing for the long haul~ PepsiCo

What has investing to do with psychology? Well, for one thing, investment behavior is guided by reason (sometimes), motivation and emotion (always), and the way people invest tells us something about their psychological makeup. If you've read my first post on Constructivist Psychology, you'll see that in Kelly's terms, people may be said to construct their investment philosophy along the dichotomous construct of security vs. opportunity.

But that's not my point today... in my own special case (and isn't everyone a special case?) investing is helping put me through college. When I sat down with my wife about two years ago to see if we could manage this crazy idea of me going to college at 42, one part of the equation was that I would keep contributing to household finances by making my investments work...and so far they have.

I'll return to investment hits and misses in future posts. Today, I'd just like to tell you about my core investment, one that I really intend to stay in for the long haul - PepsiCo.

While it may be more glamorous to invest in the kind of chips that
go into high-tech gadgets, over the long haul I'm betting you'll make
more money investing in the kind of chips people stuff their faces with.

Wait a second, what do chips of either kind have to do with Pepsi? Well,
I suppose PepsiCo is using chips of the first kind to constantly update their go-to-market technology and capability. As for the second kind, the edible one, PepsiCo just happens to be the world market leader in potato and corn chips and all other kinds of munchables through their Frito-Lay division. They also own Tropicana orange juice, Gatorade, Quaker Oats, Aunt Jemima and hundreds of other valuable brands besides soft drinks.

And in the beverages segment, while they do play second fiddle to Coke in the carbonated soft drinks, Pepsi has become leader in a number of fast-growing healthier alternatives such as bottled tea (Brisk), bottled coffee (Frappuccino), sports drinks (Gatorade), bottled water (Aquafina) and alternative drinks (SoBe).

Given the obesity debate, it also is a good thing that PepsiCo can point to a substantial number of products that can be "construed" as being relatively healthy (the company disingeneously calls these "better for you" products) or genuinely healthy ("good for you" products) - which means that, when it comes to Pepsi snacks, "good for you" is actually better for you than "better for you" :)

So, all in all, PepsiCo is a company with excellent brands, powerful marketing, and, perhaps most importantly, lots of room for continued growth, especially in international markets where people today consume the company's offerings. If there is one cloud on the horizon, it is the aforementioned obesity debate. But the probability is high that people will still want to eat tasty if slightly unhealthy foods, even if they're informed about the potential hazards of overeating.

This is an example of the psychological theory of "cognitive dissonance" - simply put, where the gut feelings or cravings are out of sync with what the well-informed mind tells us. And while one strategy to deal with that would be to change behavior to fit knowledge, most of the time we'd rather "tune out" the cognitive alarm bell and justify our behavior in some way.