On the Jan. 27 episode of The Morning Filter, David Sekera and Susan Dziubinski discuss Berkshire Hathaway’s new filing indicating a departure from Kraft Heinz. Sekera explains the implications for investors and addresses whether Kraft Heinz is a value trap. Berkshire’s reported cost basis for Kraft Heinz was above the stock’s trading value.
Dziubinski asks about Berkshire’s sale of Kraft Heinz stock. Sekera notes the discount to intrinsic valuation and low trading multiples. The technical implications of liquidating a large position in the stock could result in an overhang that impacts trading for months or quarters.
In response to a viewer’s question about Kraft Heinz being a value trap, Sekera cites Morningstar director Erin Lash’s view that it is not. The company’s strong brands and innovation have led to improved sales. Despite modest revenue growth forecasts and lower operating margins, Kraft Heinz maintains a healthy balance sheet and high dividend yield. Kraft Heinz is maintaining a steady commitment to brand investments despite an impending split. Earnings are projected to reach USD 2.51 by 2025, with a steady increase to USD 3.57 by 2029, representing a 9% compound annual growth rate. The stock is trading at 9 times 2025 earnings and 8 times 2026 earnings estimate, making it an attractive investment opportunity. Subscribe to The Morning Filter podcast for more insights.
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2. According to Morningstar, the latest job report shows that the unemployment rate has dropped to 4.2%, the lowest it has been in over a year. The economy added 500,000 new jobs in the past month, exceeding expectations and signaling a strong recovery.
3. Morningstar reveals that inflation has risen by 6.2% compared to last year, the highest increase in over three decades. This spike in prices is driven by surging energy costs and supply chain disruptions. Economists warn that inflation may continue to rise in the coming months.
4. Morningstar highlights that the Federal Reserve is considering raising interest rates to combat inflation. Fed Chair Jerome Powell stated that the central bank is prepared to take action to ensure price stability. Investors are closely monitoring the Fed’s next moves for potential impacts on the market.: Is Kraft Heinz Stock a Value Trap?