Recent Buy – Kraft-Hein Co. $KHC

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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

Beta 0.76
PE Ratio (TTM) 6.20
EPS (TTM) 8.95
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%

Profitability

Profit Margin 41.93%
Operating Margin (ttm) 27.75%

Risks:

#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%

 

Kraft Heinz 1 year stock chart

 

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

 

2 Comments

  1. I like this buy. I have been looking at the company also. I have become a bit heavy on my consumer goods/staples but it is still on my watchlist. I think this is a great buy price and will work out well for you in the future. Thanks for sharing.

    • As 10years t note hits 3%, long term holders might pull back and put more bonds to balance risks. Consumer stable will get a rebound once the us-China strike a trade deal. But they might talk for a week, so this coming week will be very volatile. Good time to buy for sure.

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