The world's best consumer brands are on sale.

PepsiCo (PEP), The Hershey Company (HSY), The Clorox Company (CLX), and Kimberly-Clark (KMB) all trade 36% to 65% below their highs. Each owns brands you have seen all your life, and each has raised its dividend through most of the past decade.

So which of them are bargains, and which are traps?

I use this one metric to answer that question… and an explanation: A share price equals a company's earnings per share (“EPS”) multiplied by the price investors will pay for each dollar of those earnings: the price-to-earnings ratio (“P/E”). When a stock falls 40%, one of two things happened: either the earnings fell, or the multiple fell.

A falling multiple on steady earnings means you can buy the same business for less money. Falling earnings mean the business itself is shrinking, and a high dividend yield on a shrinking business is a warning.

We applied that test to the 54 U.S.-listed consumer-brand companies with the following attributes:

We kept only the companies that…

ROIC is after-tax operating profit divided by the debt and equity used to run the business, net of cash. It tells you how much profit each dollar in the business produces, and our experience is that brands with real pricing power earn far more on their capital than processors that happen to sell food.

A small handful of companies passed our test, and I rank six of them here by how much of their earnings survived the decline and how far their multiples fell.

1. Shares of PepsiCo trade at $126, 36% below their high, at 16.5x trailing earnings against a 10-year median of 25.6x, and the dividend yields 4.5%.

PepsiCo reported its Q3 on October 8. Revenue rose 5.6%, and organic revenue in its international business grew 8%. But management cut its 2026 forecast for core earnings growth, excluding currency, from 1% to 2%, from the low end of its earlier 4% to 6% range. The problem is Frito-Lay in the U.S.: under pressure from activist investor Elliott Investment Management, PepsiCo cut prices on Lay's and Doritos by up to 15% this year and closed three Frito-Lay plants.

At the reduced guidance of about $8.38 per share, you are paying about 15x this year's earnings for Pepsi, Frito-Lay, Gatorade, and Quaker.

2. Earnings for Domino's Pizza (DPZ) are also at their peak, and the shares trade at $309, down 45% from the high, at 17.3x earnings against a 10-year median of 30.1.

Domino's is a franchise business: franchisees own the stores and pay the company fees, and Domino's repays its debt out of those fees. By our calculation, that model produced a 66% median return on capital over the past decade. The trouble is competition. Papa John's and Pizza Hut copied Domino's value offers, and Domino's U.S. same-store sales rose just 0.1% in Q2.

Who wins a price war between franchisors? The one whose franchisees can afford it. In April, Domino’s CEO Russell Weiner told analysts that matching Domino's prices squeezes rival franchisees, and that the two public pizza competitors had already announced roughly 450 store closures for 2026.

The risk at Domino's is its $4.77 billion of securitized notes, which are bonds repaid from franchise fees. Free cash flow (“FCF”) covered the dividend about 2.8x in 2025, and at the 2027 estimate of $20.81 per share, the stock trades at 14.7x earnings.

3. The Hershey Company, one of my favorite stocks, is the one company where we’re betting on an earnings recovery. Hershey earns 67% of its peak earnings per share (“EPS”) because cocoa costs surged after severe supply disruptions in West Africa, which grows about 70% of the world's cocoa. Its adjusted gross margin fell 6.5 percentage points to 38.3% in Q4 of 2025.

Management says it has good visibility into cocoa deflation next year, and analysts expect Hershey to earn $9.88 per share in 2027. If it does, today's price of $162 is 16.4x those earnings. The risk is market share: according to an analyst summary published by Public.com, Hershey's chocolate lost about 1.35 percentage points of dollar share in Q2 as its price gap with Mars widened.

4. Kimberly-Clark trades at 16.4x earnings against a 10-year median of 20.9x, yields 5.2%, and generates FCF equal to 8% of its market value.

But if you buy Kimberly-Clark today, you are also buying Kenvue (KVUE), the maker of Tylenol, Listerine, and Neutrogena, in a deal expected to close this quarter. Each Kenvue share converts into a fraction of a Kimberly-Clark share plus $3.50 in cash, so Kimberly-Clark will issue about 280 million new shares and pay about $6.7 billion in cash. S&P Global expects debt of up to 3x EBITDA (earnings before interest, taxes, depreciation, and amortization) at closing, and Kimberly-Clark is targeting $1.9 billion in cost savings to bring that number down.

5. Shares of Brown-Forman (BF.B), the owner of Jack Daniel's, are down 68% from its high and trades at 17.4x earnings against a 10-year median of 32.6, while FCF equals 7.3% of its market value.

The Brown-Forman business is shrinking slowly. Management expects flat organic sales this fiscal year and a 3% to 5% decline in operating income. American spirits remain off the shelves in most Canadian provinces, and management also blames cautious consumers, health-conscious habits, and the spread of GLP-1 weight-loss drugs.

What is Jack Daniel's worth to a buyer who owns it outright? Simply Wall St reports that Brown-Forman rejected a $15 billion offer from Sazerac this year. The company's market value today is $12.2 billion.

6. On July 31, Clorox raised its dividend for the 49th consecutive year. The stock is down 65% from its high and yields 6%, and at the fiscal 2027 consensus estimate of $5.74 per share, it trades at 14.4x earnings.

The dividend is the risk. Clorox now pays out about 85% of earnings, and its acquisition of GOJO Industries, the maker of Purell, closed April 1 and pushed total liabilities up 48%. Management expects more than $200 million of cost inflation this fiscal year, about double its historical range.

Now look at the companies that failed our test.

Kraft Heinz (KHC) and General Mills (GIS) both reported net losses over the past 12 months. By our calculation, Kraft Heinz earned a median return on capital of 4% over the decade, and General Mills earned 12%.

Nike (NKE) earned, by our calculation, a 30% median return on capital over the past decade, and its stock is down 80%. But analysts expect its earnings to fall to $1.28 per share in fiscal 2027, which puts the stock at 27x forward earnings. It is tough to call a great brand cheap while its earnings are still falling.

The Campbell's Company (CPB) yields 8.3%, and its stock is down 72%. Its earnings over the past 12 months are 24% of their peak, and analysts expect $1.69 per share in fiscal 2027, down from $2.17 in fiscal 2026.

Of course, just because a company is on sale does not mean that we are recommending buying them at this time. Prices could fall further.

If any one of the brands we come across in our research does rise to the level of a recommendation, we will report on it for our Complete Investor subscribers.

Tell me what you think of today’s Daily Journal: [email protected]

Good investing,

F. Porter Stansberry
Stevenson, Maryland

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1. Housing inventory swells. There are currently 1.16 million homes listed for sale in America, the largest for-sale inventory in seven years. With mortgage rates hovering near multi-decade highs of 7.4%, buyers have retreated. This means sellers will likely need to cut prices to move inventory.

2. AI stocks are now half the value of the S&P 500. The 41 names JP Morgan classifies as AI-related (the Magnificent 7, Broadcom, Oracle, Palantir, AMD, Micron, eight AI utilities, and four capital-equipment makers) make up 49% of the index's market cap. That tops the Nifty Fifty peak of 40% in 1972 and the dot-com peak of 41% in March 2000. Japan reached 44% of world equities in 1988. Only the railroads in 1881, at 63%, were larger.

3. GLP-1 weight-loss drugs could be the most realistic way to slow Medicare and Medicaid spending. Neither party is willing to cut either program, and Medicare spending alone is on track to roughly double, to nearly $2 trillion in 2036. Meanwhile, 11% of U.S. adults, or roughly 29 million people, now take a GLP-1 for weight loss, according to Gallup. A Medicare pilot program that began July 1 lets seniors get the drugs for the first time, and 600,000 signed up in the first two months. The catch has been price – around $195 per month per patient, after the $50 patient copay… A University of Chicago study published in May estimated the break-even point at $185. By that math, Medicare’s cost needs to fall only about 5% further for the drugs to pay for themselves within a decade.

In March, with gold above $4,600 per ounce, Porter warned that a pullback was likely because prices had run well beyond his gold-pricing model – based to a large degree on cumulative dollar credit growth. Since then, gold has dropped about 10% to just below $4,200 an ounce, near the bottom of his 2026 range of $4,000 to $5,200.

Steve B. writes:

Ross Hendricks’ analysis about OpenAI and the impact on AI’s sustainability was well-documented. The conclusion is compelling. Growth is a means to an end, and the ultimate end of every capitalistic endeavor is profit. Without profit every growth supported effort ultimately dies.

But does our economy function as a true capitalistic market? Not if the experience of the mortgage meltdown is an example. The income-producing segment of the economy will be forced to underwrite AI’s failure to successfully complete a build-out – as the support of AI will be required as a part of “national security.”

Clifford F. writes:

I want to learn more about the stock market and how to pick a winner.

Porter & Co. Comment: Reading the Daily Journal every afternoon is a good start, but becoming a subscriber to Porter Stansberry’s Complete Investor will provide deep insights, with specific recommendations with buy-up-to prices, buy-and-sell alerts, and regular updates. To become a subscriber, click here.