Kraft Heinz Company (KHC)

Merging with Heinz. Heinz is a high priced low growth situation, like a lot of the packaged foods types of companies. Habits are changing. If you own, grab your money and move on.

He owns a small position himself and he doesn’t really want this to be taken out, but there are not enough details in terms of where that this will be publicly listed and how it is going to unfold. He is watching it, but there is no shame in taking some of your profit. For him, he is waiting for the next 2 weeks to see how this unfolds, in order to make a decision.

The deal makes sense. The private equity group they are working with have a great track record. He thinks they will make it a better business over the next 3 to 5 years.

(Top Pick Mar 27/14, Up 14.50%) This is the domestic play. It has an attractive dividend. Earnings growth can accelerate in 2015. They are focused on optimizing (consolidating) their portfolios of products and focusing on the ones that make them the most money. They should get bigger margins in 2016 and the stock should get re-rated.

Stock vs. Stock. MDLZ-Q vs. KRFT-Q. Fairly expensive. Growth rate will be impacted by strong US dollar. Prefers Nestle because it has a lower multiple to either of the other two.

Mondelez (MDLZ-Q) or Kraft (KRFT-Q)? Mondelez is effectively the high growth story with a lower dividend, while this one is slower growth, but with a higher dividend. Not sure the market has actually seen it this way as they have rewarded the high dividend story. This has a much higher debt. He likes both stories, but finds it difficult to digest the multiples on both stories. If there was a decent retracement on the stocks, that would be the time to add.

Kraft (KRFT-Q) or Mondelez (MDLZ-Q) for the next 12-18 months? He likes both. One pays a big dividend while the other has higher growth. They are both growth stories and both can be held for a long period of time. 3.4% dividend yield.

Used to own it. Prefers SAP-T Cheese. More excess cash flow. He likes food companies.

Historically these types of companies have paid out a good amount of their retained earnings in the form of dividends. What concerns him about this company is that with the split, this company got left with the slow growth, stodgy part of the business, and Mondelez (MDLZ-Q) got all the sugar stuff. This is trading at around 18 times which seems a little pricey to him for quite a slow growth situation.

(Market Call Minute) Bad revision on the earnings.

Has had a heck of a run. Likes the food business very much, but he is having trouble with this company’s growth. Where are they going to expand and what are they going to do?

(Market Call Minute.) Saputo Cheese (SAP-T) is his preferred name in the cheese business.

You could do well buying this for the longer term at these prices. They’ve had a few missteps, but when you look at the global brands and the growth, they are well positioned on a global basis to grow. 3.9% dividend yield.

Likes it for the 3.7% dividend. Lots of restructuring and margin improvements.

Packaged food business has really lagged over the last 12 months. You are not getting revenue growth. They have a margins problem, lower than peers. The opportunity is for earnings growth alone due to management initiatives. There are better places to put your money, though.