Buy Kraft Heinz Stock? Why The Stock Is Back On Investment Radar
There are many reasons why you would want to buy a stock. But one aspect that overrides most others is the promise that the business would be run effectively and without any problem. When investors are convinced that the company’s overall fundamentals are flawless, it encourages them to take a position in the stock. This is perhaps the main reason why it is time to buy Kraft Heinz stock. With an average consensus rating of Hold and many leading brokerages like Morgan Stanley initiating coverage, the stock is no doubt a toast of the moment.
The Key Factors
Some of the most important reasons why it is time to buy Kraft Heinz stock include:
- Two of the best-known market experts have come together
- Warren Buffett & Jorge Paulo Lemann bring together their individual genius
- Berkshire Hathaway promises good resource base
- 3G Capital known for cost-cutting expertise
It is needless to mention that this company is a merger of not just two brands but also brought together the genius of the two best-known faces in the investment world. Warren Buffett is known for his sharp business sense and key role in developing forward-looking businesses. Lemann, on the other hand, is a savvy investor to who knows how to rein in losses and maximize profit. Therefore, together it is almost given that two of the greatest minds in the market will help create an interesting investment story.
The Kraft Heinz stock, experts say, will deliver robust returns over the longer term and help create a convincing and undeniably compelling investment idea. As many analysts indicate it is the type of story that can help you train your guns to new sectors f investment.
Buy Kraft Heinz Stock for the Longer Haul
The dividend payout by the stock is a key reason why you could buy Kraft Heinz stock for the longer haul. The stock has a 3% dividend yield and this almost 50% higher than S&P 500’s average yield. No doubt it makes the stock an extremely lucrative option to invest your money into and yield superior profit thereon.
Though the now merged entity does not have any history of raising the dividend, their individual subparts boast of a strong dividend line-up.
Heinz has been popularly even referred to as a Dividend Aristocrat. They have over 20 years history of raising the dividend in consecutive years till 2003.
Kraft too, despite having seen several investment owners, have never really stopped their dividend paying traditions.
Kraft’s annual dividend now accounts to about $1.70 from the company’s kitty. Given their cash flow of $2.11/share despite negative earnings growth in 2015, indicate that there is room for higher dividend payout. The negative EPS growth in 2015 has been more on account of merger and changes in accounting practices that were undertaken. Therefore, markets experts believe that the stock will continue with its rich dividend-paying history and investors can happily buy Kraft Heinz stock.
Mounting expenses and ever rising cost structures is one of the main reasons for many businesses failing to make a mark. The common wisdom says cost rationalization is almost as important for a business to succeed as perhaps profit margins or healthy debt equity ratio. With 3G Capital coming into the picture, Kraft Heinz pretty much went past that issue in one sweeping strike.
This is because 3G Capital is one of Brazil’s best-known investment ventures. The group is famous for buying faltering businesses and improving their efficiencies within a short time. Their key mode of operation includes slashing costs, boosting the income and bringing about a sustained growth model. After their successful stint in creating the best-known beer brand globally, food is 3G’s next destination. 3G has now partnered with Berkshire Hathaway to add more spice to their food foray.
Some of the most relevant and change-making business practices followed by 3G Capital takes into account,
- Zero-based budgeting: In this there is no cosmetic adjustment on expenses with regard to previous year. Everything is brought down to zero and sound justification for every expense is required.
- Nothing goes by a precedent: The expenses for the current years are based on the current need. What expense or comfort was undertaken the previous year is almost never accounted for.
It is needless to mention that this kind of practices would surely lead to layoffs and sacking. Managers who are often used to a certain luxury do not appreciate losing out on those perks and benefits. The earnings boost that 3G Capitals gains from these initiatives will convince you to buy Kraft Heinz stock for the longer run.
The Buffett Impact
Though Warren Buffett’s business policy, does not really support this strategy, the fact that this brings about a significant earnings boost is what convinces Berkshire. Additionally, the company now has a roving managerial team that help handle any inefficiency anywhere in the world very deftly.
Kraft Heinz is the fifth-largest food and beverage company in the world and the strong Berkshire push only enhances prospects. While the in-house managerial efficiencies of 3G address internal issues, Berkshire Hathaway can help bankroll any potentially small to medium and even large acquisitions to help them scale up business. With both these companies involved in a major way, it is practically an all win situation for the stock and that is why as an investor you should buy Kraft Heinz shares.
In a nutshell, therefore, you should buy Kraft Heinz because
- Of higher cost rationalization
- Efficient management of operations
- Higher scalability prospects
- Stronger dividend payout
- Better expansion prospects
Armed with the firepower of the power partners of the investment world investors can actually bet on growth when they buy Kraft Heinz shares.
For more details and all the latest updates on the best investment bets, simply subscribe to our newsletter. We help you build on your investment with our detailed research and deep understanding of market trends.
This was not an investment or trading advice. It is just the analysis of reasons that investors are showing more tendency to buy Kraft Heinz stock.