The household name Kraft Heinz Co KHC enjoys a lofty perch in the portfolio of investing icon Warren Buffett‘s Berkshire Hathaway, commanding a substantial 3.45% of his holdings, making it the seventh largest position. Buffett’s faith in the company dates back to 2015 when the stock fascinated him. Today, over a quarter of the company’s outstanding shares belong to Berkshire Hathaway.
Despite a lackluster five-year performance on the charts, Buffett has remained firmly wedded to his stake in the company. Such has been his confidence that, as recently as early 2019, he vocally professed his willingness to hold the stock a decade from that day.
Golden Cross Raises Bullish Flags
On January 17, the stock exhibited a Golden Cross— a technical indicator signaling that investors are growing more bullish on the stock. This manifested as the 50-day Simple Moving Average (SMA) crossing above the 200-day SMA, symbolizing a consistent upsurge in prices and mounting momentum. Market participants have pivoted their outlooks from bearish to bullish amid this shift.
Kraft Heinz has delivered a commendable 16.5% total return since October, outperforming the S&P 500.
Fundamentals Point to Turning Tides
At the fundamental level, certain trends signal a potential turnaround for Kraft Heinz stock.
As a stalwart in the consumer staples sector with a portfolio of 200 trusted brands worldwide, the company’s recent reinvestment endeavors seem to be yielding fruit, marking a shift from a decade of hardships. The company’s strategic pivot toward reinvestment in marketing and product innovation is driving growth at the bottom line. Key segments such as Emerging Markets, cold cuts, and food service are anticipated to be drivers of future expansion.
Embracing a balanced strategy encompassing deleveraging, well-covered dividends, and a $3 billion share repurchase initiative, Kraft Heinz stands on a solid financial footing.
Value Stock for Long-Term Gain
Despite the risks posed by a tough retail environment and slightly elevated leverage, Kraft Heinz’s appealing dividend yield, ongoing share buybacks, and value investment potential present an enticing prospect. The stock trades at a forward Price/Earnings ratio of 12.75 versus the sector median of 17.96. The forward dividend yield presently stands at 4.23%. The average 5-year yield for the stock amounts to 4.66%.
Even amidst unimpressive performance on the surface, surging international sales growth, robust cash flow generation, and improving profitability metrics position Kraft Heinz favorably for encouraging long-term returns.
Photo: Created using AI via Midjourney