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, 2020 | 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 2019 … 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, 2018 the shares price was at $88.
#3 The yield is at an all time high at 4.1%, the beta remains
| Beta | 0.76 |
| PE Ratio (TTM) | 6.20 |
| EPS (TTM) | 8.95 |
| Earnings Date | May 2, 2021 |
| 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, 2021
#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
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.