I still have 55 free trades from Wells Fargo. I figured, If I kept my Ameritrade account, it would be $7/trade, if I bought 7 shares of any company, the stock would go down $1 before I actually “lose” any money LOL :). So, I took the plunger and bought some shares of $KHC which happens to hit its 52-week low today.
Why $KHC a good investment?
#1 I’m a picky eater, and I still have to buy $KHC products – mind you that it’s process food. Along with other people in my life like Mr.W’s mom drink Maxwell House Coffee, Mr.W eat Planter’s peanut. And I love Heinz ketchup. These buying decision wasn’t based on me owning the stock but it was because they’re all American Brands that we’ve become accustomed.
#2 Mr. Warren Buffett owns
|Berkshire Hathaway, Inc||325,634,818||Dec 30, 2017||26.72%||25,373,464,422|
With Heinz, Berkshire and 3G paid $72.50 per share, or a 20% premium to their price before the deal. And that was on top of the 27% gain in the stock’s price over the two years prior to the deal.
But he didn’t overpaid for it because the shares he got was preferred shares:
Buffett received, along with this regular common stock, special preferred shares that paid out a dividend of 9%
Then KHC bought those preferred shares out to avoid the expensive dividends in 2016 … Anyhow, I don’t think I overpaid for the shares either, coming at 52-week low, or a multi-year low, as the merger June 29, 2015 the shares price was at $88.
#3 The yield is at an all time high at 4.1%, the beta remains <1 so the share price will remain stable
|PE Ratio (TTM)||6.20|
|Earnings Date||May 2, 2018|
|Forward Dividend & Yield||2.50 (4.10%)|
|52 Week Range||55.30 – 93.88|
|52-Week Change 3||-36.98%|
#4 It helps that the payout ratio is at 27.37%
|Operating Margin (ttm)||27.75%|
#1. Mr. Buffett has step down from the board in Feb, 2018
#2. Growth, it’s a consumer staples, it’s not like I’m going to increase my ketchup intake from 1 bottle to 2 bottles hahah! LOL 🙂
#3. Shares price might push further down as wages to increase, it’s probably going to cost higher to make a bottle of ketchup per se, which translates to less profit
#4. Gas price is going to increase – again, cost more to produce and transport
#5. The shares price might be pushed further down to no end before stabilizing, I’m catching a falling knife right now. I’ve been burnt before with $KMI which is in $900 in RED with only 70 shares, so, this could happen. LOL 🙂 I think I’m okay with a slow buying pace though, I will not make another purchase until the shares price is close to $50 or lower, that way, I still can tolerate the loses, while collecting dividends of 4.1%
I’d like to have $KHC as one of the anchor for my portfolio, just stable and continue to put out dividends for a long time as long as Americans like ourselves continue to uses its products. That way, once in awhile, when I buy an outlier growth stocks at low yields or no dividends payout, it will smooth out yields ~3% is cool with me. What do you think about my $KHC buy? Where do you think the consumer stable are going to go? Would you take a plunger at the 52-week low or wait for the knife to drop lower?? hhiihi