Summary
- Kraft Heinz has fallen to a point that we can safely say that there is ketchup on the streets.
- Warren Buffett quotes have not been in short supply considering that he also owns a large stake in this stock.
- While the risks have been reduced by the significant price decline another small move in margins would result in a dividend elimination.
- Throw the "low P/E" argument out of the window and look at this metric.
- This idea was discussed in more depth with members of my private investing community, The Wheel of FORTUNE. Start your free trial today »
When we last touched on The Kraft Heinz Company (KHC) after the results, our key takeaway was that the stock "appeared cheap" and the main problem was significantly bloated forward estimates. Our decision to stay out has so far proven correct as the stock has not been able to find its footing. While we have stayed on the sidelines, we have seen many bullish takes on the stock, replete with Buffett quotes. That makes sense as Warren Buffett owns a substantial stake in this company and is never one to shy away from showering us with a Hallmark card worthy quote.
We have been known to use sentiment a lot in our work. It has produced some great results. It helped us pick among other, the massive lifetime top in NVIDIA (NVDA) and this timely bottom in Altria (MO). Fear and greed play a role in all investments and running the theme on valuation without being cognizant of sentiment is likely to cause significant pain. At the same time, one has to take into account the rather difficult path that lies ahead of KHC. We hope to provide the risks of owning this investment and identify the point at which it does become worth risking your neck for.
