<\/p>\n
Most people buy a stock because they heard the name, liked the product, or watched it climb. Jim Cramer thinks that habit is backwards.<\/p>\n
On Wednesday’s broadcast of CNBC’s “Mad Money,” the host laid out how he starts hunting for stocks to own, and his method flips the usual order.<\/p>\n
He told viewers to begin with the big picture first, then work down to a single company that fits.<\/p>\n
One name cleared that filter: PepsiCo (PEP).<\/p>\n
How Jim Cramer’s top-down approach to picking stocks actually works<\/p>\n
Cramer’s message was direct.<\/p>\n
When you’re searching for stocks to own, you need a worldview, the “Mad Money” host said, according to CNBC. That means a view on the economy and interest rates first.<\/p>\n
Once he has that read, he looks for sectors positioned to benefit, then finds the specific companies inside them.<\/p>\n
This is called a top-down approach, which means you start with the economy, narrow to a sector, and only then pick a stock, instead of falling for one company in isolation.<\/p>\n
Cramer, who co-founded TheStreet and ran the hedge fund Cramer Berkowitz through the 1990s before moving to television, has spent decades preaching this discipline to retail investors.<\/p>\n
His current read led him somewhere specific: companies that gain when oil prices fall, and that pay you a dividend while you wait.<\/p>\n
That search brought PepsiCo onto his radar. He is not alone in liking the name, and TheStreet’s own pros flagged PepsiCo as a top pick for 2026 for many of the same reasons.<\/p>\n
Why falling gas prices put PepsiCo (PEP) on Cramer’s shortlist<\/p>\n
The link between cheaper gas and snack sales is more direct than it sounds.<\/p>\n
When drivers pay less at the pump, they have more cash for everyday extras like chips and soda. PepsiCo sells exactly those things through Frito-Lay and its beverage brands.<\/p>\n
The national average for a gallon of regular gasoline fell to $4.06 in early August, with crude oil prices sliding into the $70-per-barrel range, AAA reported.<\/p>\n
More Consumer Staples Stocks:<\/p>\n
Dividend King Coca-Cola is suddenly acting like a growth stock<\/p>\n
Dividend King pays Warren Buffett’s Berkshire $848M each year<\/p>\n
Does Coca-Cola pay dividends? Its yield and payout explained<\/p>\n
The federal government sees the trend continuing. The Energy Information Administration forecasts retail gasoline prices will fall about 6% in 2026 before edging up 1% in 2027.<\/p>\n
PepsiCo’s management flagged fuel costs as a real drag on sales.<\/p>\n
“I think the consumer is worse than what we had anticipated, and it’s driven mainly by gas prices,” CEO Ramon Laguarta said on the company’s second-quarter earnings call, according to CNBC.<\/p>\n
That comment cuts both ways for investors. It confirms the pressure, and it points to relief if pump prices keep drifting lower.<\/p>\n
Jim Cramer told viewers that spotting a stock idea is only the starting point of his research process.<\/p>\n
lcva2 \/ Getty Images<\/p>\n
What PepsiCo’s valuation and 4% dividend offer investors right now<\/p>\n
Cramer’s second filter was downside protection through a large, reliable dividend.<\/p>\n
PepsiCo fits that description well. The stock currently yields about 4%, several times the roughly 1% average yield of the S&P 500.<\/p>\n
On valuation, Cramer noted the stock trades at about 16 times projected 2027 earnings, a level he considers cheap for a company of this quality.<\/p>\n
For context, that sits below rivals like Coca-Cola (KO), which trades at a much richer multiple after a strong 2026 run.<\/p>\n
Here is why the setup interests value-focused buyers:<\/p>\n
Three reasons PepsiCo screens as cheap for patient investors<\/p>\n
Yield near 4%. PepsiCo pays a quarterly dividend of $1.48 per share, giving income while the turnaround plays out.<\/p>\n
A discounted multiple. At about 16 times 2027 earnings, the stock trades below its consumer-staples peers.<\/p>\n
A beaten-down price. Shares recently traded near $140, well below the 52-week high of $171.48.<\/p>\n
None of that guarantees a rebound. A cheap stock can stay cheap if sales keep slipping, so the dividend is the reward for waiting.<\/p>\n
How Elliott’s $4 billion stake is pushing PepsiCo to change<\/p>\n
Cramer isn’t the only heavyweight paying attention. An activist investor has been pressing PepsiCo’s management for over a year.<\/p>\n
Elliott Investment Management built a stake of about $4 billion in PepsiCo and sent the board a letter outlining ways to accelerate growth, Food Dive reported.<\/p>\n
Elliott pushed for concrete moves, including refranchising the company-owned bottling network and reviewing underperforming food assets for possible sale.<\/p>\n
In December, 2025, the two sides reached an agreement rather than fighting a proxy battle. <\/p>\n
PepsiCo committed to reducing its product count by about 20%, simplifying ingredient lists, and cutting prices on snacks, FoodBev Media reported.<\/p>\n
Related: Where is Coca-Cola’s headquarters? All about its Atlanta, GA base<\/p>\n
Here is what that means for you as a shareholder.<\/p>\n
Activist pressure often forces a slow-moving company to sharpen its focus, which can lift the stock if management delivers. <\/p>\n
That same pressure already showed up in operations, with Frito-Lay closing distribution centers and cutting jobs earlier this year.<\/p>\n
What PepsiCo’s latest earnings say about the turnaround<\/p>\n
The company’s second-quarter results showed both the problem and the opportunity.<\/p>\n
Net revenue rose 6.4% to $24.18 billion, beating estimates, while core earnings came in at $2.20 per share, a penny below consensus, Yahoo Finance reported.<\/p>\n
The split between home and abroad tells the real story.<\/p>\n
Globally, food volume rose 3% and beverage volume rose 2%. But North American beverage volume dropped 4%, and North American food volume was flat, CNBC reported.<\/p>\n
To win back domestic shoppers, PepsiCo already acted. It rolled out price cuts of up to 15% on Lay’s, Tostitos, Doritos, and Cheetos in February, after years of steep increases, Fortune noted.<\/p>\n
Those cuts pressure margins now, but they aim to rebuild volume over time.<\/p>\n
How PepsiCo stock stacks up against the market and its rival<\/p>\n
PepsiCo has been an underperformer, and the numbers make that plain.<\/p>\n
PepsiCo trades well off its highs and carries a Moderate Buy rating, with an average analyst target of $158.06. This is based on 18 analysts, with 12 Holds and 6 Buy ratings.<\/p>\n
Coca-Cola, meanwhile, is “crushing” its rival on Wall Street, the New York Post reported, with shares up more than 26% for the year as of late July, Barron’s reported.<\/p>\n
That gap is exactly what draws value buyers. You are paying less for PepsiCo’s earnings and collecting a bigger dividend than Coca-Cola offers.<\/p>\n
The trade-off is patience. Coca-Cola is winning today, helped by a strong World Cup marketing push, while PepsiCo is still working to fix its North American volume.<\/p>\n
What still needs to happen before PepsiCo pays off<\/p>\n
Cramer was clear that liking a stock is not the same as owning one.<\/p>\n
“That’s the genesis of an idea, not a position,” he said, adding that investors still need to study the company over years and figure out whether management will do what it says.<\/p>\n
For PepsiCo, a few things need to fall into place:<\/p>\n
Four things that would strengthen the bull case for PEP<\/p>\n
Gas prices keep falling, freeing up consumer cash for snacks and drinks.<\/p>\n
North American volume stabilizes, showing the February price cuts are working.<\/p>\n
Elliott’s plan delivers, with bottling and portfolio changes lifting margins.<\/p>\n
The dividend holds, rewarding investors through the wait.<\/p>\n
If those pieces line up, the low valuation gives the stock room to recover. <\/p>\n
If North American demand stays weak, the turnaround could stretch well into 2027.<\/p>\n
The bottom line is straightforward. PepsiCo offers a cheap price, a generous dividend, and an activist pushing for change, but it still needs to prove its home market is healing before the payoff arrives.<\/p>\n
For now, Cramer’s larger point stands. A good stock idea is a starting line, not a finish line, and independent analysis matters more than the recommendation itself.<\/p>\n
Related: Coca-Cola absorbs margin hit for expansion in key market<\/p>\n
#Jim #Cramer #sends #blunt #message #investors #picking #single #stocks<\/p>\n","protected":false},"excerpt":{"rendered":"
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