This Warren Buffett Favorite Just Made A Golden Cross: Bullish Signals On The Horizon

The Kraft Heinz Co KHC is one of the top holdings of legendary billionaire investor Warren Buffett. The stock is the seventh largest holding of his Berkshire Hathaway portfolio commanding 3.45% of it.

Buffett first got bullish on the stock in the third quarter of 2015. At 26.58%, over one-fourth of Kraft Heinz’s outstanding shareholding is now owned by Warren Buffett’s Berkshire Hathaway.

While the stock hasn’t been able to perform well on the charts for the past five years, Buffett has held onto his share in the company. In early 2019, Buffett told CNBC he would be happy to own the stock 10 years from now.

This Warren Buffett Favorite Just Made A Golden Cross

On Jan. 17, the stock made a Golden Cross, a price chart signal that investors are getting bullish on the stock. The 50-day SMA has crossed over the 200-day SMA, indicating that prices are continuously increasing and gaining momentum. Traders and investors have changed their outlooks to bullish rather than bearish.

Kraft Heinz exhibited a robust 16.5% total return since October, surpassing the S&P 500.

Fundamentals Indicate The Tide May Be Turning

On the fundamental business level too, there are some indications that the tide may be turning in favor of Kraft Heinz stock.

As a major player in the consumer staples sector with 200 trusted brands globally, the company’s recent reinvestment efforts are paying off, signaling a turnaround from a decade of struggles. The company’s strategic shift towards reinvestment in marketing and product innovation is driving bottom-line growth. Key segments like Emerging Markets, cold cuts, and food service are expected to contribute to future growth.

With a balanced approach of deleveraging, well-covered dividends, and a $3 billion share repurchase program, Kraft Heinz is financially sound.

Value Stock For Long-Term Returns

While risks include a challenging retail environment and slightly elevated leverage, Kraft Heinz’s solid dividend yield, ongoing share buybacks, and value investment potential make it an attractive opportunity. The stock trades a forward P/E of 12.75 versus a sector median of 17.96. The forward dividend yield currently stands at 4.23%. The average 5-year yield for the stock is 4.66%.

Despite stagnant performance, international sales growth, strong cash flow generation, and improving profitability indicators position Kraft Heinz for optimistic long-term returns.

Photo: Created using AI via Midjourney