Jim:    This is head-to-head week! I'm stacking up the biggest brand name stocks against their iconic competitors, in order to teach you the single most important skill to being a great investor... how to compare stocks so you know which one is cheaper... which one is the better value... which one we believe will go up the most... the better buy...

This is a gigantic project... the ultimate Mad Money educational guide to evaluating stocks...

We've already done McDonald's versus Burger King... and Coach versus Tiffany...

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Now we're going to use that same 10-point scale that I introduced yesterday to judge a real clash of the stock titans...

Coca-Cola (KO) versus Pepsico, Inc. (PEP)... What's cheaper?... What's the better buy?...

And don't think KO, because it's a $54 stock and PEP* is a $70 stock... The share price means nothing...

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First on the Mad Money checklist... it has to be the sector...

Since a stock's sector accounts for 50% of its performance, the comany's sector is worth up to 5 out of 10 points on the Mad Money stock scale...

So where do KO - a beverage company... and PEP* - a food and beverage company... stack up based on their sector?

In an environment where inflation has peaked, we just got I believe the last bad consumer price index number, and the last bad producer number, but the economy still has not at all rebounded. The playbook that all the managers use says buy safety... buy something defensive... which is why PEP* and KO bucked today's awful downturn... Normally, you'd give food and beverage companies a 5 for sector in this kind of environment - remember, 5 being the best - because, when people think defense, they think KO and PEP*... but, remarkably, KO has actually seen some economic pressure... You have to understand that that's close to unheard of... but they talked about it on their (earnings' conference) call... particularly on convenience store purchases...

So, instead of 5, I'm giving KO 4 points... this is the sector weighting... and PEP*?... 4.5... because it was KO and not PEP* that said the economy was causing some pain...

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After you look at the sector, you can compare the stocks head-to-head... and there I say the first and most important thing that managers care about and you should care about... is growth...

On the growth front, KO seems tapped out...

Other than its bolt-on acquistion of Vitamin Water, which looks to be a brilliant, brilliant move... KO is already though in a lot of countries, getting 81% of its operating profit from overseas, and needs to reignite growth to make money... historically, a very hard thing to do...

Carbonated drinks in the U.S. are a flat category... no pun intended... and, in fact, sparkling beverage sales were down 4% for KO last quarter... plus PEP* and KO are locked in an endless price war... Doesn't it seem like we've been paying the same price for these drinks for years?...

PEP*, which gets only 29% of its operating profit from outside the western hemisphere, has a lot more room for international growth... much more than KO... We give PEP* 1 point for growth prospects... and KO earns no points... bringing the score to... PEP*, 5.5... KO, 4...

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Next strategy...

Controlling your own destiny!... Here PEP* has clearly figured out that the soft drink category can be a long-term loser!... So PEP* is now a snack food company with a soda arm... while KO is soda...

Witness the battle mentioned in the very front section of The Wall Street Journal today, about KO's massive olympian spending to blunt PEP*... to which I say, come on man... they're both commodities!...

KO has innovated though, coming up with Coke Zero, trying to take the inevitable shelf space from PEP*... hey, that's brilliant right?... But PEP* says, wait a second, the soda aisle is the bloody war between the states... How much better is it to be the Spanish-American war... which is what the snack aisle feels like...

PEP*'s acquisition of Quaker Oats, which brought both Gatorade - a huge franchise - and snacks, to augment PEP*'s Frito-Lay division, sure beats KO buying 50 cent out of the Vitamin Water acquisition...

PEP* doesn't want to waste time fighting for the soda aisle... Instead, we're getting real innovation from them in the snack aisle, where they're taking shelf space from Rold Gold, Herrs, and Utz... a whole lot easier than taking it from KO...

Another point for PEP* and I'm willing to give KO half a point for the winning ways of Coke Zero... even though they're fighting the wrong war.

PEP*'s lead now widens to 6.5 to 4.5...

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You have to look at management next...

To me, this is a big X-factor... harder to value this than some of the other things...

At PEP*, you have Indra Nooyi, cementing her leadership... she's been there for a little bit now...

At KO, Neville Isdale, a Cramer favorite, has been replaced with first-year CEO, Muhtar Kent... We don't like first-year CEOs, because they tend to either mess up or obliterate earnings... but the Buffett factor... the fact that Berkshire Hathaway Inc. (BRK-A) owns 200 million shares of KO gives the stock a big halo effect versus PEP*...

People love... they love Buffett so much that they forget about KO's meager growth, so I'm giving a half a point to each...

PEP* still leads 7 to 5...

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All right, now... dividends...

KO is higher at 2.8%. PEP* is a 2.4% yield... but maybe that's because KO's down a lot... I mean PEP* has a better record of dividend increases... Let's give a point each here...

Okay, 8 (for PEP*) and 6 (for KO)...

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Next, we look at raw costs...

Six weeks ago, with grain skyrocketing and gasoline going to $5 smackers, it was easy... KO, with costs locked in, was best of show... PEP* has more exposure to trucks driving Frito-Lay snacks to stores everyday than KO does... Remember, Fritos need to be replaced constantly... it's a great generator of cash for supermarkets... plus Frito-Lay has a lot of expensive ingredients...

But with gasoline and grain prices falling, PEP* is now the better play...

KO deserves a half point for locking its prices in, right?... They have very, very good commodity costs... PEP* also gets a half point... let's call it the "dumb luck factor"...

8.5 to 6.5... PEP* is one top...

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All right... let's call it... let's call it right here...

PEP* wins on points. It also wins on valuation...

Both KO and PEP* trade at about the same price-to-earnings multiple, versus next year's earnings... even though KO is growing at 9% and PEP* at 11%...

I say game over!...

I believe PEP* deserves a higher multiple and, therefore, a higher price.

Here's the bottom line!..