Best Stocks for 2008: Validea sees 'pop' in PepsiCo (PEP)

"While Buffett has long been a fan of Coke's stock, it's Pepsi that appears to be more, well, 'Buffett-like' these days. The company has increased its earnings in eight of the past ten years, growing earnings per share from 95 cents to $3.34 in that time -- just the kind of steady, predictable growth my Buffett-based model likes.

"In addition, Pepsi's average return on equity over the past decade is an exceptional 29%, almost twice my Buffett model's 15% standard. That's a sign that management is doing a good job with shareholders' money, and that the company has established what the Oracle of Omaha refers to as a 'durable competitive advantage' over its peers.

"My Lynch-based model also thinks the time is right to buy Pepsi. Lynch famously used the P/E-to-Growth ratio to find growth stocks selling on the cheap, and at 0.99, Pepsi's P/E/G falls into the range that gets approval from my Lynch-based model. Plus, Pepsi has a debt/equity ratio of just 18%, showing the kind of conservative financing that Lynch valued.

"Moreover, if you're still jittery over the US economy, consider this: My Lynch-based model views Pepsi as a 'stalwart,' the kind of high sales/moderate growth stock that Lynch found offered protection in tough times.

"Indeed, with its incredible name recognition, increasing presence in expanding foreign markets like India and South America, and stellar fundamentals, a few shares of Pepsi should hit the spot in 2008 -- even if the economy lags."