Kraft Heinz (KHC) đŸ„« - Share Chat

CNBC team plan to discuss this situation with Warren Buffett during Monday. As Berkshire owns around 25% of Kraft-Heinz it’ll be interesting to hear his views regarding whether he plans to sell, hold or increase their current position.

Interesting times


Matt

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Let’s not forget that the price could continue falling, rather than increasing here :sweat_smile:

Do you think that the stock’s undervalued now, based on the fundamentals / compared to it’s peers?

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I expect it will be another 10% down over next 3 months. Ive learned from experience not to jump in on one freefall. Stocks tend to bleed after a big fall IMO

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An SEC accounting investigation, a $15bn impairment, a 10 per cent earnings drop, stagnant YOY Q4 Net Sales, divestitures, and a one-third dividend cut [reducing its quarterly dividend to $0.40 a share, or $1.60 a year — down from $2.50 a year].

Even before the latest sell-off, the shares had fallen about one-third since the 2015 megamerger tie-up.

Lack of innovation and marketing fails to satisfy healthier consumer tastes: $15bn impairment reflects diminished prospects of core brands as Oscar Meyer meats and Kraft cheese.

The writedown highlighted investor concerns that the ruthless cost-cutting for which 3G is renowned had hurt the business.

$30bn in net debt, equivalent to a bulging five times ebida is well above the three times forecast at the time of the 2015 merger and inconsistent with the current investment grade credit rating.

The company forecasts ebitda will fall by nearly a fifth in the first quarter of 2019.

Merged the negatives I read in 2 FT articles. Safe to say, these problems for Kraft Heinz have been years in the making and unlikely to be fleeting. I’ll be interested to hear what Warren Buffet says on this @Mat

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Yes I agree with what you said but my intention was to make it clear that when you see a drop, don’t close immediately the page and look somewhere else because can be an opportunity!
Anyway this is just my thought :crazy_face:

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For sure! Apparently value investing’s making a bit of a comeback so I’m sure you’re not the only one with that kind of mentality right now :grinning:

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I hold Kraft Heinz, so yeah smacked today!

But I’ll continue investing regularly in them, they’ve proven before that they can buy brands and sell them off for big profits. That’s basically what Heinz has been doing for years and what has earned them their valuations.

Clearly a bit of a mess currently, I think merging two massive companies has proven more difficult than they thought
!

Fortunately, I’m investing regularly so pound cost averaging will iron out most of today’s losses over the next few months.

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I learnt that the hard way with Royal Mail. Nice rise today though, hopefully it continues :crossed_fingers:

I hope Unilever makes a bid for them
 What a slap in the face that would be!

Obvs ULVR wouldn’t buy them as they’ve been shedding their foods/ spreads business.

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Any idea which particular segment this is planned for? Would be keen to tune in for the interview.

I think that the interview with Warren Buffett will initially be shown on CNBC at around 11am (UK time), midday (CET). I would imagine that extracts of the interview will then be shown throughout the day.

Matt

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Here’s the interview -

CNBC’s summary -

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It’s going to take a lot longer than “a few months” to clear up the mess Kraft Heinz are in. I see a bottom at $25, it’s got a lot more to fall. It will be 1-2 years before you break even, even if you pound cost average.

I agree with others that it may be better to hold off for a bit longer before buying. Although I have never done research into KHC so don’t know much about the fundamentals.

Warren Buffett’s comments on overpaying were also interesting!

Do you have any numbers to back up your bottom of $25?

I’ve only recently added Kraft to my portfolio and based on my numbers and future projections, this loss will actually be ironed out completely through pound cost averaging even if the stock value remains as it’s current position. This is largely as it was a small % of the portfolio to begin with (smaller now!).

Your opinion is noted however :slight_smile:

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That would be hilarious, incredible to think that KHC tried to acquire Unilever only 2 years ago. Currently unilever’s Market cap is nearly 4x KHC, it’s amazing the difference a couple of years of bad results can make!

Totally agree, this is a great opportunity if people still think it has value. Just consider this 26% off the price you were about to pay for it. If there’s a time to invest it’s now - but as Rollingskies sad it’s not going to instantly bounce back :rocket:

So thinking about this a bit more, 2018 adjusted EPS was $3.53, if you compare that to the earnings of premier foods in the U.K. which has been in a real mire for a long time, a P/E ratio of 5-6 become not unfathomable. At least if stagnating revenues and declining earnings persist. That would place the stock at around $17.65-$21.20

At the moment the dividend probably protects against such a fall but how safe is that exactly? The balance sheet doesn’t look strong, with around $38B in debt that comes in around 5.5xEBITDA. The interest is going to be crippling and further dividend cuts may take place in order to address this large debt pile.

Of course I could be wrong! Sales could pick up and earnings could increase which would lead to a much better outlook and valuation. However I’m sceptical this is going to happen any time soon if indeed at all.

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I just love this story :rofl: Would make the day so much easier!