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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
No. of Recommendations: 2
“ Kraft Heinz Stock Could See More Pressure If Berkshire Sheds Stake
Berkshire Hathaway’s new CEO Greg Abel may be looking to clear out losing investments, including potentially selling all or part of its 27% stake in Kraft Heinz rather than take another write-down on the money-losing holding. Berkshire indicated the move in a filing but didn’t respond to Barron’s request for comment.
Berkshire owns 325.4 million Kraft Heinz shares valued at around $7 billion. Under then-CEO Warren Buffett, Berkshire received them as part of a merger of Kraft and Heinz in 2015. The filing said it may “offer to sell from time to time” shares from that stake.
It could be that Buffett wasn’t pleased about Kraft Heinz’ plan to split into two companies, a move that would create a higher-growth company and a slower-growth one. He saw little point in a split reversing their merger and increasing corporate costs because of duplicated functions.
Brands include Kraft Mac and Cheese, Heinz ketchup and sauces, and Philadelphia cream cheese, a portfolio that could be considered a disadvantage as more consumers pursue fresh foods, niche brands, and private-label products. But Heinz ketchup and Philadelphia cream cheese are solidly profitable brands.
Kraft Heinz has been a poor investment for Berkshire, which owned about half of Heinz before the merger. It had taken the company private with 3G, the investment firm founded in Brazil, in 2013. Buffett helped engineer the merger of Kraft and Heinz. 3G has exited what once was a sizable stake in Kraft Heinz.
What’s Next: If Berkshire does start selling, Kraft Heinz stock could come under additional pressure, after hitting a 52-week low on Wednesday. Berkshire will have to disclose a transaction within two business days. Kraft Heinz is expected to split the company in the second half of this year.
—Andrew Bary and Janet H. Cho“
No. of Recommendations: 2
$7B is almost a rounding error. Can't be the reason for lagging the market lately. For two days now my whole watch list is a sea of green, except for one name...though, personally, a period of stock price weakness would suit very well.
Kellog's split into two a couple years ago, then both companies got acquired:
Value Unlocked: By July 2025, the combined 2025 acquisitions of WK Kellogg by Ferrero ($3.1 billion) and Kellanova by Mars ($35.5 billion) resulted in a total value of roughly $38.6 billion, which was about 75% higher than the initial $22 billion pre-split valuation.
Sounds good. Maybe Mars would like some "cheese" to put on those crackers?
No. of Recommendations: 9
The interesting thing is that there is a price for everything. It's quite possible that Kraft Heinz is a buy at these levels.
It's still an ongoing business that does make money in general. If this year were neither unusually bad nor unusually good, they'd be making, what, maybe $2.50 a share? EPS has been pretty flat for the last decade (sales too), and that would represent a number near the bottom of the range.
Not my choice, for a variety of reasons, but I think there's a passable chance that it's worth more than the current quote of $22.60 for those who merely think things won't get materially worse.
As there is no obvious reason to expect the price to do well any time soon, and there is a lot of bad sentiment, it might be a good candidate for repeated cash-backed put writing roughly at the money. I imagine that ought to make at least 10%/year without much difficulty, barring a new big leg down in business results.
Jim
No. of Recommendations: 1
Which option maturity do you recommend?
The nearest options have the highest volatility, esp those just after expected earnings date of Feb 15. Later dates don’t give you a much lower entry point.
Also the high dividend yield of 7.2% makes put writing less attractive. Maybe just buy the stock in a tax advantaged account.
A bottom is probably near - almost all the news is negative. And a split up company could benefit from M&A opportunities like Kelloggs.
