Prime Stock Advisory Letter for December 11th, 1998

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Today's Comments:  The overall market moved sharply lower yesterday.  The Dow Jones Industrial Average is now in a clear downward trend.  Their appears to be concerns over the possibility that the upcoming impeachment vote will result in President Clinton being impeached in the Senate.  If the this does occur it will have a negative effect primarily on the market for 2 main reasons: A.) It will be very distracting  and B.) The uncertainty over how it will effect the leadership of this country.  The market never seems to react well to uncertain events.  In addition to this the high valuation of the market appears to be coming into play.  In my opinion a pullback in the market to bring valuations to more reasonable levels would be a positive event for the market in long term.  The Bottom Line:  The market should move lower.

Company:   PepsiCo, Inc.       Symbol: 'PEP'         Closing Price: $38.00/share.
YH: $44.81 YL: $27.56     EPS: $1.32     P/E: 28.7     Forecasted EPS: $1.39
Dividend: $0.52      Yield:  0.13%      Ex Dividend: 12/9/98
Price Targets:  $33.75 & then $31.94        Upside Stop:  $39.375
Options Recommendation: December 40 Puts,  Symbol 'PEPXH' @ $2.125/contract.

Company Description: This company is a major soft drink company.

Recent News:  12/10  Morgan Stanley cuts Coca Cola earnings estimates.

Our Analysis: The shares of Pepsi gapped lower on the open of trading yesterday.  They finished the day by closing below a key support level on heavier than normal trading volume.  The shares should continue to move lower and test $33.75/share,  the point from which they gapped higher late October of this year.  If the shares close below that level then they should continue to move lower and test $31.94/share,  the point from which they gapped higher in mid October.  The shares of Pepsi have come under pressure recently due to the problems that Coca Cola has encountered with its over seas sales.

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