The Heinz Kraft Company Could Be Warren Buffet’s Next Big Winner
If there’s one thing Warren Buffett knows well, it’s that a single great investment with big returns can wipe out the negativity generated by a few bad ones. Buffett’s company, Berkshire Hathaway Inc. (NYSE:BRK.A), stands ready to post record profit levels on Friday, November 6th on the back of a robust gain in its Kraft Heinz Company (NASDAQ:KHC) stake, with the KHC stock price poised to grow even further.
Buffett in fact was instrumental in helping to negotiate and finance the merger of the large food company, of which Berkshire Hathaway happily became the largest shareholder back in July. The Kraft Heinz Company Stock price has done exceptionally well as of late.
Kraft Heinz stock Is Only The Beginning
Despite Buffett’s hit-or-miss investment record this year, this will go far in resurrecting what would have been an otherwise unspectacular year for his investment firm. Shares in Berkshire Hathaway have in fact dipped more than nine percent since December 31, 2014. GEICO Insurance, one of the biggest units in the conglomerate, has struggled to find its footing in the face of surging claims expenses. (Source: “G turns to civil suits in bid to fight fraud,” Boston Globe, November 2, 2015.)
Likewise, BNSF, Berkshire’s railroad, has increased spending in an effort to claw back market share. (Source: “Ardagh Pulls Share Sale on Tough IPO Market in U.S.,” Bloomberg, November 2, 2015.) But several other big-name stocks under Buffett’s belt have also struggled as of late, including American Express Company, Wal-Mart Stores Inc., and International Business Machines Corporation.
The Bright Side to the Equation, and What it means for KHC stock
Now, despite Buffett’s reputation being that of a market oracle who knows a winning stock when he sees one, this year’s performance was a dismal one indeed. The big exception of course is his home run with KHC stock. But every smart investor knows that we all have our bad years, and that includes legendary billionaire Warren Buffett.
But not all of the losses have been the result of a lack of foresight. GEICO for example has struggled largely as a result of the industry-wide rise in automobile accident frequency and severity. Insurance companies with large exposure to automobiles have had to raise rates to offset increased losses, which has hurt their bottom line when it comes to stock performance.
Small Successes Can Make Up for Small Failures
But the Kraft Heinz Company stock price is not the only surprise success of Warren Buffet’s, because the investment guru has hit several other small-scale home runs this year. Buffett turned a healthy profit after having cut and run from his stake in Munich Re, the biggest reinsurer in the world. (Source: “Why Warren Buffett Sold Munich Re,” Forbes, October 7, 2015.) With success like that on his resume, you can bet that Kraft Heinz stock might be poised for a huge upswing soon.
But it doesn’t end there, because he is also about to gain from his 17% holding in Symetra Financial Corp., which is currently bracing itself for a $3.7 billion acquisition. The billionaire investor is also banking on his huge investment in precision Castparts Corp., a manufacturer of high-grade metal parts in the aerospace and energy sectors.
There’s no denying that businesses of all kinds have a tendency to flourish when Warren Buffett acquires a position in them. The KHC stock price is direct evidence of that. The investor has displayed an impressive ability to take a sober look at a market and identify the right stock picks. Berkshire Hathaway’s multi-decade success story stands as a quiet testament to this.