A Sparkling Future

by Bill Gunderson | December 2012 | Post your comment »

I love to visit the county fair every year.  I have always been a soft-sell for many of the gadgets that are being demonstrated by the showmen at the fair.  I have bought salsa makers, sushi makers, magic mops and just about every other type of gadget designed to make my life easier.  Most of the gadgets are now buried in my drawers and closets.  They never quite lived up to my high expectations.
I have seen many attempts over the years of making your own soda pop.  I remember my mom and dad bottling root beer many years ago, only to have the bottles explode in the middle of the night under my bed, the cool, dark place where they were being kept.
I also remember gadgets at the fair that promised to be able to make soda for pennies per glass.  It all sounded good, but none of them ever seemed to take off.  Finally, a little company outside of Tel Aviv came up with a system that has taken off.  The system is now in most of the major retailers across America.  I bought mine at Sears.
Soda Stream Intl. (SODA) went public in November of 2010 at $25 per share.  It has traded as high as $79 per share since then and is currently trading at $35 per share. While I currently do not own any shares of the stock for myself or my clients at Gunderson Capital Mgt., I do own the product, and I like the long-term prospects for this company.
This product is convenient, it saves me a lot of money and the quality is very good.  I just hate lugging bottles or cans of soda pop home from the supermarket.  I also hate to deal with the containers once empty.  Soda Stream’s containers are reusable and the syrups last a long time.  I love convenience.
I can order by mail or pick up flavors like Coke, Mountain Dew, Green-Tea, Dr. Pepper and numerous others to change ordinary tap water into a delicious sparkling drink.  There are even syrups for the high-energy drinks.
I like to add some sparkle to some good filtered water and add a twist of lime when I get done with my exercise.  There is something about those tiny bubbles tickling my nose.  Soda Stream announced an agreement today with Campbell’s Soup (CPB) that will allow users to now get V8 splash and V8 fusion.  Now, that sounds healthy.
I have not done the math on how much I save by making my own soda, but I know that it is way less than half-price.  Now you are talking my language!  How about the shares: are they half-price too?  Let’s have a look:
When I was an analyst on Wall St., I would visit companies, talk with their management and write a research report on the company.  Part of that report was a valuation on the shares.  Now I have an app that I invented that values more than 3,000 stocks daily.  Here is what I come up with on Soda Stream’s valuation.  The company is expected to make $2.84 per share this year and to grow those earnings by 30% per year over the next five years.
If Soda Stream can meet those lofty expectations, the company would be earning somewhere in the neighborhood of $8 per share, five years from now.  While that may be optimistic, I still see significant upside potential in this stock over the years.  As always, there is a lot of risk from competition, the economy and so on.
This is an aggressive small-cap stock that is not suited for the faint of heart.  If this is not your cup of green tea, then I highly recommend the product.  It would make a nice gift for the holidays, and it is a way of investing in Israel.  To get more ideas like this and to see my three model portfolios on a weekly basis, go to my website at http://www.pwstreet.com to sign up for my newsletter.
All data from Best Stocks Now app.

Leave a Comment