Warren Buffet has a knack for finding undervalued companies to invest in, with many of these being staples in the American economy with a strong brand reputation that frequently spans decades.
However, that doesn’t mean that every single decision has paid off for him. In fact, one of Buffett’s major investments has been a complete failure. Shares of Kraft Heinz (NASDAQ: KHC) fell significantly on Thursday after reporting its recent earnings results.
Kraft reported revenues of $12.4 billion over the first half of the year, which was 4.8 percent less than the year before. The worst figure was Kraft’s operating income, which fell by 54.6 percent over the first six months of 2019.
Overall, the company had losses of $598 million in the second quarter, with total impairment losses for the first half of the year coming in at a whopping $1.2 billion. Kraft also revealed that it had missed earnings estimates and that the company is facing a subpoena from the SEC.
“The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward. We have significant work ahead of us to set our strategic priorities and change the trajectory of our business. But in my short time with the company, I have developed a strong appreciation for the affinity consumers around the world continue to have for our brands, the talent and determination of our employees, as well as the commitment of our customers,” said CEO Miguel Patricio. “We have a lot to work with and build upon, and our team is motivated by the opportunity to drive the next phase of growth and profitability for Kraft Heinz and our shareholders.”
Shares of Kraft Heinz fell by 8.6 percent in response to the announcement. Over the past year, the company has seen it’s stock fall drastically, shedding over half of its value since mid-2018 where the company was trading around $60 per share. Now Kraft is trading at $28.22, although to the stocks credit, shares have stayed relatively the same since April 2019.
It’s uncertain whether or not Warren Buffett considers the company an even better buy at its’ drastically reduced price, or if he’s considering shedding some of his stake in the struggling company.
At the moment, Berkshire Hathaway is Kraft’s biggest shareholder, and should the Oracle of Omaha choose to dump the stock, don’t be surprised if Kraft enters a freefall. Buffett did admit earlier this year that he was wrong about the company but stated at the time he wouldn’t be buying or selling KHC shares in the future. Time will tell whether he will stick with this promise or not.
Kraft Heinz Company Profile
In July 2015, Kraft merged with Heinz to create the third-largest food and beverage manufacturer in North America behind PepsiCo and Nestle and the fifth-largest player in the world. Beyond its namesake brands, the combined firm’s portfolio includes Oscar Mayer, Planters, Ore-Ida, and Philadelphia.
Outside of North America, the firm’s global reach includes a distribution network in Europe and emerging markets that drive around one fifth of its consolidated sales base, as its products are sold in more than 190 countries and territories around the world. – Warrior Trading News
