May 19, 2008

A new purchase

I have bought an entry position in Dr. Pepper Snapple Group (DPS). A recent spin-off from Cadbury.

In my analysis the company appears to be undervalued compared to its peers. The company has host of good consumer brands and good position to expand into Mexico and capitalize on the Hispanic population increase in the US.

Although the company has a high degree of leverage, as the parent loaded it up with debt to buy the bottling business, I think it is manageable as the company free cash flow is excellent.

Next post will be part 1 of my evaluation of the company. Part 2 will follow with share valuation.
Since now I own DPS I have to switch from Coke to Dr. Pepper or Canada Dry.

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