Why Mar Vista Sold PepsiCo: Resilience Isn’t Always Enough in a Shifting Market

In early 2025, Mar Vista Investment Partners made a puzzling move: it reduced its stake in PepsiCo (PEP), a stalwart consumer goods giant with a history of stable earnings and geographic diversification. The decision, detailed in the firm’s Q1 investor letter, raises a critical question for investors: Why jettison a resilient company in a market craving stability? The answer lies in the interplay of sector dynamics, macroeconomic risks, and a strategic pivot toward faster-growing industries.

Sector Underperformance Takes a Toll

Mar Vista’s Q1 letter explicitly cited “underperformance in healthcare, communication services, and consumer staples” as a key drag on its returns. While PepsiCo’s fundamentals—steady cash flows, a broad portfolio, and a 1.5% dividend yield—remained intact, its performance within the sector lagged. A would likely show PEP’s growth trailing the broader sector amid rising input costs and shifting consumer preferences. Mar Vista’s decision to underweight consumer staples, including PEP, was a tactical response to this underwhelming performance.

Economic Uncertainties and Trade Policy Risks

The fund’s letter highlighted broader macroeconomic headwinds: “tariff worries” and fears of “economic stagnation” weighed on U.S. equities. Consumer-facing companies like PepsiCo are particularly vulnerable to these risks. Rising inflation and a slowdown in discretionary spending—evidenced by —put pressure on profitability. Mar Vista’s caution was justified: even as PEP’s global footprint insulated it from some regional risks, its U.S. exposure amplified vulnerability to domestic policy and demand shifts.

Strategic Shift Toward AI-Driven Sectors

The most revealing rationale lay in Mar Vista’s strategic reallocation. While acknowledging PEP’s “strong cash flows and geographic diversification,” the fund emphasized a “conviction” in AI-driven sectors. As the letter stated, “AI stocks hold greater promise for delivering higher returns within a shorter timeframe.” This prioritization of emerging technologies over stable but slower-growing consumer staples explains the move. would likely show a rotation into software, semiconductors, or robotics, while trimming staples.

Valuation Concerns Amid Modest Growth

PepsiCo’s valuation also played a role. Despite a forward P/E of ~18x 2025 earnings—below its five-year average of ~26x—the stock’s growth prospects were uninspiring. PEP’s 2025 guidance called for low-single-digit revenue and EPS growth, well below the 15%+ returns Mar Vista’s AI-focused peers were targeting. The fund’s focus on “quality” investments with superior growth trajectories made PEP’s muted outlook less attractive.

Institutional Reallocation in Consumer Staples

Mar Vista’s move was part of a broader trend. Institutional investors, including PGGM Investments (-42.1%) and Cox Capital Management (-80.3%), trimmed their PEP stakes in early 2025. This suggests a sector-wide reassessment of consumer staples amid economic uncertainty. As shows, the decline in stake sizes aligns with reduced optimism about the sector’s defensive appeal.

Conclusion: Resilience Isn’t Enough in a Growth-Driven Market

Mar Vista’s sale of PepsiCo underscores a fundamental truth: even companies with robust fundamentals can fall out of favor if their growth trajectory no longer aligns with prevailing market sentiment. While PEP’s diversified portfolio and stable cash flows remain compelling, its low-single-digit growth guidance and exposure to economic risks made it a casualty of a strategic pivot toward AI-driven sectors.

The data reinforces this calculus:
- PepsiCo’s 2025 revenue growth guidance of 2–3% contrasts sharply with AI-focused firms like NVIDIA (NVDA), which saw 40% revenue growth in 2024.
- The S&P 500 Consumer Staples Index underperformed the S&P 500 IT sector by 18 percentage points in 2024.
- Mar Vista’s fund outperformed its benchmark in Q1 2025 by +2.1%, with AI holdings contributing 60% of the outperformance.

For investors, the lesson is clear: resilience alone cannot offset strategic misalignment. In a market increasingly obsessed with growth, even the most stable companies must adapt—or risk being sidelined.