In Gordon Pape's Internet Wealth Builder, analyst Tom Slee looks at "recession-resistant" stocks. Here, he reviews Philip Morris Int'l. (NYSE: PM) and PepsiCo (NYSE: PEP).

"Philip Morris continues to benefit from rising tobacco consumption and 'uptrading' as people in the emerging countries switch to more expensive products.

"Almost recession proof, the international tobacco industry is prospering thanks mainly to new markets, strong cash flows, and reduced litigation.

"Most important, the threat from deep discount products, which commanded 13% of total worldwide sales at one time, is declining due to aggressive marketing by the majors.

"Amongst these, Philip Morris International has an edge as it penetrates four large markets where the company currently has little or no presence: China, India, Vietnam, and Bangladesh.

"What really impresses me about PM is that its earnings growth is not entirely top-line driven. The company has embarked on a $1 billion cost savings program that involves streamlining and supply chain initiatives.

"We should see the benefits of this more clearly when exchange rates become more favorable. Earnings for this year are expected to come in at about $3.20 a share with an increase to the $3.40 range in 2010. Buy Philip Morris International with an increased target of $55.

"PepsiCo is another multi-national that is successfully battling the recession. Future sustained growth, however, requires a fresh approach: more flexibility as well as new products. The good news is that management is responding to the challenge.

"In August, Pepsi completed a deal to buy its two top bottlers for $7.8 billion, an increase from the original $6 billion bid. This will give the company direct management over 80% of its North American drinks distribution and more control over packaging and pricing. 

"Above all, the acquisitions allow Pepsi to respond to changing tastes and bring new products to market quickly. The deal adds 15c to the bottom line when all the synergies are realized.

"I see the purchases as a very big plus. Ten years ago, this was a simple carbonated drink industry. Not any longer. These days, it's all about bottled water, juices, teas, and changing tastes, fads even. That poses difficulties but they are manageable. 

"The company feels that it can adapt and looks for 11% to 13% earnings growth in 2010. We could see earnings of $4.20 a share then. The market seems confident that Pepsi will meet its target. The shares still have upside potential. Buy PepsiCo with a new target of $67."