But now we are seeing a return to the old ways… to conventional gloves-on cola warfare… Input costs have come down, the commodity hedges that locked in higher prices, are all coming off… Coke and Pepsi can go back to spending more on promotions… and offering value to consumers…

The conventional kind of Cola warfare that allowed both companies to grow in the old days… and should allow for return to growth in the future… it is a benign duopoly… Pokom and terrorists may be becoming… it is coming here… and it could be fabulous for the numbers… this is the kind of thing that causes investors to be willing to pay more for a companies earnings… and it makes me want to buy Pepsi, which my charitable trust, ActionAlertsPlus.com actually did yesterday… when I heard applomatic-like rumblings.

Pepsi has been doing really well despite the weakness in North American beverages… mostly because I bet you can’t eat just one Frito…  If a truce breaks out, if you can get some real volume growth there… then I think this stock will be even more attractive… this isn’t just about Pepsi… there is a broader lesson to learn here… I am trying to impart as your investing coach… about what makes stocks move.

There are two reasons to believe that a company's stock price is going higher…

Either, because you think that its earnings will be better than expected… or, because you think that investors, primarily the big institutional investors who manage so much money... that they pretty much set stock prices, are willing to pay more for those earnings… to give a stock a higher price to earnings multiple… the price of a stock equals the earnings per share times the multiple… P = E x M…. simple arithmetic, we are always trying to solve for M… not even math, a third grader could do this…. when a cola war has come to an end, or at least reverting to a less savage mode of combat, I think Pepsi is therefore going to be due for some multiple expansion… the M that you multiply the E by, is going to get bigger… because there is more of a chance of it beating numbers… and that will drive up the stock price.

How is this all going to come out?…

Okay... Pepsi has a lot of good things going for it right now… commodity prices have already come down… think about all of the stuff that goes in… everything in this stuff has come down.. and the real benefit for Pepsi should kick in in the second half, most likely the fourth quarter of 2009... and what about convenience store sales, they are way up… isn’t this where you buy the stuff… at convenience stores, right…. that is where you say, oh man I got a little munchie thing going… and that is because of lower gas prices… it is the unparalleled international king of snack food with Frito-Lay… it has been gaining share both in American and in abroad.

The one big problem area has been the North American beverage business…. if you get a piece in our soda aisle… you will get a higher price… Last quarter’s volumes were down 6%… and that was horrifying when I saw it… so anything better than that will be an important… and I think that Pepsi can do much better…

Through the end of February, numbers were flat for the entire category… We had some good numbers from the bottling companies too.. with sales growth up to 5% to 6%, thanks to the price increases… with some nifty new products and more advertising dollars… Pepsi can finally start to focus on increasing sales and volumes… these are the key metrics… they are what the pros look at when they evaluate a stock like this… if they can stabilize beverage volumes, just stop having them decline… then I think that the big boys will become much more interested…

But, if Pepsi can get genuine growth… they will jump all over this… give it a much higher multiple.

Right now, Pepsi trades at an incredible lowly-worm 14 times earnings… about 27% below its 5 year historical average… (and that) puts it in line with Coke, General Mills, and Clorox… but a bigger discount than Alberto Colbert, Church & Dwight, and to Hershey… and I don’t think any of them are as well run as Pepsi… although, I do like Hershey Co. (HSY)…

Given Pepsi’s consistent earnings, strong management… remember the company's fantastic CEO, Indra Nooyi… as well as massive investments in its products and new brands, it really should be trading at a premium to the other stocks in the group… and, if it can get these North American beverages volumes up, I think that it will… Let’s not forget that Pepsi has a 3.32% yield, better than a jagged bottle cap tearing thru your cornea… given that 40% of the average historical return from coming stocks has come from reinvesting dividends… despite the stock markets incredible run… This stock, Pepsi, is only 7 points off of its low… a whopping 23 points off of its high… because the market is lopping up industrials, and tech, and banks… and leaving these steady growers behind… but when people see the earnings acceleration in Pepsi… they will circle back and grab one.

The bottom line…