Summary
- We have stayed cautious on Kraft Heinz as it moved lower and lower.
- The stock has officially entered the buyzone we previously identified.
- The combination of the price drop alongside lower bond yield and slower growth has made us more optimistic on its future prospects.
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We covered the Kraft Heinz Company's (KHC) Q4 2018 earnings which were a rather epic disaster. Our take then as the stock dropped below $40 was "You Can't Touch This." As the stock moved lower further and sentiment soured further, we followed up with another piece where we summarized our take as:
We want to get involved here but with a wider than average margin of safety. At $28/share, the EV to EBITDA will be under 10X, a point we can safely say that risk reward will be firmly in our favor. On our now very famous scale of 1-10, where 1 would be "Avoid like the bubonic plague" and 10 would be "Buy like this is Apple in March 2009," we would rate KHC a 5.0, with a $28 price warranting a 6.0. With that in mind, we will be looking at selling the right puts to establish our long position.
We did get $28/share. Do we buy or do we chicken out? We give you our latest take below.
