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Tickers in this Article: JSDA, HANS, KO, PEP, FIZZ
I don't make the news - I just report it. So, if you're wondering why you're reading about mid-cap soft drink stocks, it's because this group managed to put up some nice numbers over the last week and a half, while pretty much everything else took it on the chin.

Surviving the market-wide debacle inspired by Lehman and AIG (NYSE:AIG) is no small feat. If soft drink stocks can perform like that in the face of big trouble, I think we at least owe it to ourselves to find out why. Maybe they can do even better when there's a tailwind.

Soda Pops
Since the close of trading on September 12 (the Friday before financial stocks started to unravel) to September 23 close, the S&P Mid-Cap Soft Drink Index is ahead by 13.3%. The S&P 500, for comparison, is down 5.0%. If this was just a temporary disparity, it might be dismissible. It's hardly a fluke though. The S&P Mid-Cap Soft Drink Index is also up 10.9% for the last three months, while the S&P 500 is down 7.1%. That's more disparity than I can dismiss.

And just to be clear, it's not the whole soft drink industry on a roll. Coca Cola (NYSE:KO) is off by 7.0% for the last week and a half, while Pepsico (NYSE:PEP) is lower by 3.2%. So no, this strength is unique to at least one of the companies wedged into the middle of the industry.

The Usual Suspects
There are no real surprises about the names here - just some likely surprises to see them finally doing well. The mid-caps of the soft drink world include a host of bottler stocks, most of which haven't done any better than Coca-Cola or Pepsi have lately. However, Hansen Natural (Nasdaq:HANS), Jones Soda (Nasdaq:JSDA) and National Beverage Corporation (Nasdaq:FIZZ) - the three big niche players in the arena - have all seen their stocks driven upward over the last several days, and they've been driven up enough to more than carry the weight for the group.

Given the recent news, the sudden improvement could be a tad surprising. Jones Soda has fallen short of expectations for six straight quarters now. And on Monday, Hansen was named in a class action lawsuit that alleges the company omitted key information in a 2007 filing, causing the stock to trade at values higher than it should have.

None of it seemed to trouble any of the three stocks, which had plenty of bullish fizz on Tuesday while the rest of the market had gone flat. Perhaps the market is finally looking at results instead of momentum.

Undervalued or Just Volatile?
Talk about cheap. While the group may be up for the past three months, the Mid-Cap Soft Drink Index is still down about 50% from its November peak. The $64,000 question still hasn't been answered however: Does getting cut in half mean these mid-cap stocks are values, or are they still a potential bellyache for investors?

Earlier in September, National Beverage reported a 10% increase in first quarter income ended August 2, 2008. That's not a huge improvement. In fact, National Beverage's income statement has never really shown fantastic growth, but the company has been a picture of consistency. I'll trade some consistency for growth right now.

Hansen got the job done too, in spades. It's posted three straight years of top and bottom line growth, and is on its way to a fourth. With margins of 17.2% and a twelve-month price multiple of 18.3, I don't see how you can't like the stock - lawsuit or not. The fact that the short interest on Hansen is a hefty 39% doesn't hurt either; I could see the shorts getting squeezed soon.

The only liability I see is Jones Soda. It swung to a loss last year, and hasn't seen one positive quarter since then. Analysts aren't looking for profit anytime soon either. Normally I wouldn't care about analyst's estimates, but the company has proved its pessimistic expectations right a little too often recently. (For related reading, check out Stock-Picking Strategies: Value Investing and Introduction To Trading: Momentum Traders.)

Last Sip
Jones Soda seems to have fizzled, but Hansen and National Beverage really do look like solid additions to any portfolio.

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