1. The Kraft Heinz Company (NASDAQ:KHC)
Hedge Fund Holders: 38
The Kraft Heinz Company (NASDAQ:KHC) manufactures and distributes food and beverages worldwide. Its offerings include cheese and dairy products, condiments, meats, sauces, tomato products, refreshment beverages, and more.
The last few years have proved historically challenging for the company due to a shifting macroeconomic landscape and the rise of more budget-conscious consumers looking for discounts and deals. However, despite these headwinds, The Kraft Heinz Company (NASDAQ:KHC) is generating financial efficiencies to support profitability margins. Its fiscal Q3 2024 adjusted earnings per share (EPS) grew by 4.2%, reflecting stability.
Consumer spending is benefiting from a robust economy and recent interest rate cuts by the Federal Reserve, the effects of which are prominent in the core North American market. The Kraft Heinz Company (NASDAQ:KHC) is thus expected to benefit from these trends. The company’s focus is on executing its strategic pillars to generate strong cash flow and drive profitable growth.
Analysts are bullish on the stock due to its solid 5.3% dividend yield. This rate is well above its industry group average of around 4%. This positions the company as an attractive opportunity. In addition, Warren Buffett, through Berkshire Hathaway, remains the largest shareholder of The Kraft Heinz Company (NASDAQ:KHC), holding 326 million shares. This translates to around 27% of the entire company, and reflects confidence in its long-term outlook.
Mairs & Power Growth Fund stated the following regarding The Kraft Heinz Company (NASDAQ:KHC) in its Q3 2024 investor letter:
“We added The Kraft Heinz Company (NASDAQ:KHC) to the Fund in the quarter. Kraft Heinz is a leading global food company which possesses a portfolio of iconic brands, including its eponymous ketchup brand. The company has been undergoing an operational transformation focused on driving efficiency gains in supply chain, manufacturing and distribution. These efficiency gains have fueled increased investments in technology, automation, innovation and marketing, which should ultimately drive more consistent organic revenue growth and high single digit earnings per share growth. We expect above-average long-term returns, buoyed by consistent free cash flow generation, opportunistic share repurchases and an attractive 4-5% dividend yield. A modest current valuation affords an ample margin of safety.”
Overall, KHC ranks first among the 12 best pizza stocks to buy according to hedge funds. While we acknowledge the potential of pizza stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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