Are you a fan of bargain stocks? Are you fond of Warren Buffett’s approach to stock picking? You’re in the right place if you answered “yes” to these two questions. Buffett has a few names in his portfolio that are currently holding true value. Berkshire Hathaway portfolio are dirt cheap.
One of these could be a great way to make you richer very soon. This stock? Kraft Heinz Company (NASDAQ: KHC).
Buffett’s miserable, long journey with Kraft Heinz
You may have been surprised when Buffett suggested Kraft Heinz as an investment worth considering. Since it was created out of Kraft Heinz, the stock has been a complete disaster. Buffett orchestrated a 2015 deal between food giants Kraft Heinz, for which he held a stake in Heinz. Synergies that were hoped for never materialized, and eventually the stock fell well below the 2017 high.
Buffett had to confess that “we overpaid for Kraft” by 2019. The Oracle of Omaha was saying in retrospect that the companies and their brands did not mesh well together, and that the cost savings expected were never realized.
Next, the pandemic hit and was followed by a rampant inflation. The competition has also been improving their game. What is the end result? Kraft Heinz’ shares have not made any net gains since the beginning of 2021, and are down 60% or more from their high in 2017.
Warren Buffett has a good reason for keeping Berkshire Hathaway’s 325 million Kraft Heinz shares it holds since 2015, when the two companies merged. Buffett believes Kraft Heinz has potential. He should, for several good reasons.
Kraft Heinz is back with a new improved product.
The fact that, after an arduous and painful post-merger road trip, there is finally light at the other end of the dark tunnel. The Kraft Heinz Company’s relative new CEO Carlos Abrams Rivera seems to be on top of the problems. This is a misinterpretation of what food brand consumers want.
Now, consumers are looking for low-cost convenience that is also tasty. The company is repositioning its popular macaroni-and-cheese products as complete meals. Its 360 Crisp frozen food line allows customers to create crispy grilled cheese sandwich in the microwave instead of on a grill. Fast Company recently named Kraft Heinz as one of the most innovative companies in the world.
Of course, product development is just half the battle in a turnaround. This merger disappointed me in the financial aspect as well. It’s time for the company to take a hard look at unnecessary expenses. Kraft Heinz aims to achieve this goal. Spend less annually By 2027, the organization will have reduced its costs by $2.5 billion; 700 million dollars of that amount were cut last year. Last year, the organization’s $26.6 billion in revenue was turned into a net profit of $2.8 billion.
Another reason why the future of Kraft Heinz looks better than in recent years. The company relies heavily on data to guide its strategic decisions for the first time since a very long time.
Investors shouldn’t wait too long for the efforts of the company to show results. The modest growth in revenue last year still supported a net income increase of 20%. Analysts expect to see more progress in this direction this year and the next.
Follow Warren Buffett as he leads
Still, Kraft Heinz? There are still options that offer higher growth, even when the business is booming. These options are more risky, though, as they come with a markedly higher valuation.
What is the S&P 500The trailing Price-to-Earnings Ratio is now more than 23, while the forward-looking Price/Earnings Ratio is above 21. Both are well above averages over time. Kraft Heinz shares trade at only 15.5 times their trailing earnings, and at less than 12x this year’s anticipated per-share profit. This is cheap in any environment.
Kraft Heinz will offer a higher dividend yield than the S&P500, at over 4,4%. Buffett may have been patient because Berkshire still has plenty of money to invest in this struggling stock.
Connect the dots. The Kraft Heinz Company is not priced in the market at this time. These efforts can’t be ignored forever by investors, particularly now that the initiatives are gaining traction. Take a shot at this Buffett stock now before other investors do.
Would you like to invest in Kraft Heinz?
Consider these factors before you purchase Kraft Heinz stock.
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James Brumley No position is held in the mentioned stocks. Berkshire Hathaway is a stock that TraderStarter recommends and has positions. TraderStarter recommends Kraft Heinz. TraderStarter is a Disclosure policy.
The stock of Warren Buffett is so cheap that it could make you rich Originally published by TraderStarter