Great Call on Pepsi! What's Next?

OK, so Pepsi's (NYSE: PEP) second quarter wasn't anything to write home about. I get it; some people are disappointed. But all the same, it seems like Pepsi investors should be pretty happy considering the way the company and the stock have held up during the worst recession in most of our lives.

Plus it's not like archrival Coca-Cola (NYSE: KO) put up numbers that were much better. And when you live in a world where it's Pepsi, Coke, and then everyone else, keeping up with the Joneses is pretty important.

Nearly 3,600 members of The Motley Fool's CAPS community (including yours truly) have weighed in with their thoughts on Pepsi, and an overwhelming 97% have given the stock an outperform rating. But none has read the stock better than Capsperson, who has made four outperform calls on Pepsi since October 2007, has been correct on all four, and has racked up 38 points on that stock alone.

Capsperson is one of CAPS' All-Stars -- players with a rating of 80 or greater -- and has managed a stock-picking accuracy of 74% while racking up more than 3,500 points. Pepsi isn't this player's only great call. Here's a look at a few of the other prescient picks:

Company	Date Picked	Date Ended	Call	Points	CAPS Rating (out of 5)
Chesapeake (NYSE: CHK)	10/10/08	11/5/08	Outperform	77	*****
Bank of America (NYSE: BAC)	7/16/08	7/24/08	Outperform	64	***
Fifth Third Bancorp	4/8/09	4/16/09	Outperform	58	**

Data from CAPS.

So what is this investor looking at these days? Here are a few of the most recent calls on CAPS:

Company	Date Picked	Call	CAPS Rating (out of 5)
Kraft Foods (NYSE: KFT)	7/28/09	Outperform	****
Terra Nitrogen (NYSE: TNH)	7/27/09	Outperform	***
Goldcorp (NYSE: GG)	7/14/09	Outperform	**

Data from CAPS.

While not all of these picks may pan out, they could be a good place to start further research. I decided to take a closer look at Terra Nitrogen.

Improving yield
Whether you're a customer or an investor, Terra Nitrogen has likely been putting a smile on your face over the past few years. For customers, the improved yield comes from the ammonia products that the company sells -- products that form a vital part of the nitrogen, phosphorus, and potassium trifecta of plant nutrition.

For investors, the improvement in yield has been the spiking dividend payout that's come their way as prices and demand for fertilizer products shot up. In 2004, Terra paid out $1.75 per share in dividends, while it handed out nearly $12 over the past 12 months.

Unfortunately, the story doesn't end there for investors. The market for natural resources of all stripes has softened considerably as we've trudged our way through recession. During the second quarter, Terra watched both the price and sales volume of its products take a Wolverine-type slashing, leaving the company with revenue that was 44% lower than the prior year.

The hefty drop in the price of natural gas -- one of the primary inputs in Terra's business -- has helped buoy the company's bottom line, but a turnaround in the ammonia market is the smelling salt that the company really needs.

CAPS members weigh in
The CAPS community has a mixed view on Terra. Though more than 1,100 members have rated the stock an outperformer, there have been enough detractors to leave the stock stuck at a mediocre three-star rating.

DemonDoug, one of CAPS' best-performing members and a fan of Terra, has been bullish on the stock since October, when he said:

No debt. Pays solid dividend. Virtually zero chance of going bankrupt. Supplies needed products in the real (as opposed the fake paper) economy. Will definitely survive the downturn, and will be positioned well for future growth, and I'm singling out TNH because of the first item I mention on this pitch: NO DEBT.

But here's the important question: What's your take? Will Terra Nitrogen's clean balance sheet and ammonia fertilizers help it barrel through the recession? Get in the action by clicking over to CAPS. It's absolutely free and already has more than 135,000 stock pickers chipping in to find the best stocks out there.