Opinions
Paul Harris, CFA
Kraft Heinz Company
KHC-Q
TOP PICK
Aug 04, 2016
Stock price when the opinion was issued
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Premium contentPremium contentOur PAST TOP PICK with KHC has triggered its stop at $38. To remain disciplined, we recommend covering the position at this time. This will result in a net investment gain of 11%, when combined with our previous recommendation to cover half the position.
Premium contentThe Kraft Heinz Co. engages in the manufacture and market of food and beverage products. It operates through the North America and International geographical segments. The company was founded on July 2, 2015, and is headquartered in Pittsburgh, PA. Social media mentions are up 1300% in the past 24h.
Consumer staples are outperforming in the last few days, and that speaks to the advantage of having a balanced portfolio. Companies like KHC, UL, KVUE, and Nestle. It's not that they won't be affected (their costs would go up), but they're far less cyclical than other businesses. Earnings will be much more stable. Earnings could fall 10%, but not 50%. Dividends will be sustained.
Companies like Unilever and Nestle are huge in NA, but huge globally as well.
This was a merger of Kraft and Heinz. Earnings just came out and they quadrupled their bottom line because of cost cuts and lower commodity costs. Kraft was a much more US domestic business and Heinz was a much more international business, so cross-selling will be really important. Trading at around 20X earnings. This will do another acquisition, much bigger, down the road. Dividend yield of 2.8%.