We recently compiled a list of the 8 Best Value Stocks to Invest In According To Warren Buffett. In this article, we are going to take a look at where The Kraft Heinz Company (NASDAQ:KHC) stands against the other the Best Value Stocks to Invest In According To Warren Buffett.
Is the market too expensive? That’s the big question with major market indices at all-time highs even as the Federal Reserve cuts interest rates to try and prevent the economy from plunging into recession. Warren Buffett, the most revered investor on Wall Street, is sending alarm bells as he continues to trim stakes in some widely held stocks on valuations getting out of hand.
Buffett’s actions in the market in recent months have raised concerns about the overall market outlook as the economic growth starts showing signs of weakness. Growth in the labor market cooling off and growing at the slowest pace since 2021, with the manufacturing sector also slowing, has raised serious doubts about the economic outlook.
READ ALSO: 10 Best Performing Warren Buffett Stocks in 2024 and 14 Worst 52-Week High Stocks to Buy According to Short Sellers.
Consequently, the US Federal Reserve cut 50 basis points interest rate to support the struggling economy. Nevertheless, it is the fact that Buffett has yet to make a massive purchase or investment despite having close to $300 billion in cash reserves at his disposal, which continues to send jitters among the investment community.
Warren Buffett is known for his unwavering commitment to value investing, which is clearly shown through his investment holdings. When pitted against most of the top-tier hedge funds out there, the billionaire investor tends to purchase stocks and then holds on to them for years, if not decades, as part of his long-term holding strategy. Consequently, the best value stocks to invest in, according to Warren Buffett, have achieved incredible gains primarily through the appreciation of their share prices over time.
Since Buffett has always stuck to his value investing strategy that focuses on undervalued companies, suggestions that the market is too expensive have been quoted as one reason he’s gone entirely. There are also suggestions that the billionaire investor is waiting for the market to collapse from current highs before deploying the $300 billion at his disposal.
The Oracle of Omaha has already indicated in recent years that he does not see an abundance of value investment opportunities to pursue with the market at all-time highs. Nevertheless, Buffett’s portfolio still consists of stocks trading at some of the lowest price-to-earnings multiples that offer some of the best value investing opportunities.
Additionally, Buffett’s portfolio consists of companies showing tremendous upside potential in earnings and revenue growth. Consequently, according to Warren Buffett, the best value stocks to invest in are companies well poised to generate long-term value for shareholders.
While Buffett has been trimming stakes in some companies, it does not mean he no longer believes in their long-term prospects. Instead, the sell-off spree is part of the billionaire investor’s bid to lock in profits after one of the longest bull runs in recent history.
The sale also indicates how large some of his stakes in the company have become. Buffett had always advocated for locking in profits, having paid the price of not selling stakes in a giant beverage company when the stock stretched to 60 times earnings in the 1990s.
Even as the billionaire investor trims stakes, his portfolio remains well diversified in various sectors and poised to generate long-term value.
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Our Methodology
We sifted through Berkshire Hathaway’s Q2 2024 13F filings and picked stocks that were trading at a forward P/E of under 15 and were expected to experience earnings growth this year. Finally, we ranked the stocks in descending order of their forward P/E ratios. We have also included Berkshire Hathaway’s stake and the number of hedge fund holders for each stock, as of Q2 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
The Kraft Heinz Company (NASDAQ:KHC)
Expected Earnings Growth 2024: 9%
Latest P/E Ratio: 10.9
Warren Buffett’s Q2 2024 Stake: $10.49 Billion
Number of Hedge Fund Investors as of Q2 2024: 43
Kraft Heinz Co (NASDAQ:KHC) is a consumer defensive play by Warren Buffett that manufactures and markets food and beverage products. Its product line includes cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products.
Its competitive edge as one of the best value stocks to invest in, according to Warren Buffett, stems from implementing solid pricing strategies that have allowed it to strengthen its performance amid the high interest rate environment and inflationary pressures.
The firm effectively maintained its second-quarter 2024 adjusted gross profit at $2,296 million, an increase from $2,239 million in the previous year’s same period. It enhanced its quarterly adjusted gross margin by 210 basis points (bps), reaching 35.5%.
This notable achievement demonstrates the effectiveness of pricing strategies designed to counteract the increase in raw material costs. Kraft Heinz Co (NASDAQ:KHC)’s adjusted operating income rose by 2% to $1,380 million in the second quarter, underscoring the advantages of lower costs related to commodities and logistics.
Kraft Heinz Co (NASDAQ:KHC) keeps outperforming in its three main areas of food service, Emerging Markets, and U.S. Retail Expansion platforms, even with obstacles in the consumer market. KHC is diligently working to change its business model to realize its complete potential and increase its value for its shareholders.
The outperformance is one of the reasons the company’s earnings are projected to increase by 12.50% in the current quarter and 9% for the entire year. Amid sales and earnings growth, Kraft Heinz Co (NASDAQ:KHC) returns value to shareholders with a dividend yield of 4.61%—additionally, the stock trades at a discount with a price-to-earnings multiple of 10.9.
By the end of Q2 2024, 43 hedge funds listed in Insider Monkey’s database had invested in Kraft Heinz Co (NASDAQ:KHC). Warren Buffett’s Berkshire Hathaway is the company’s leading shareholder, with 325.63 million shares.
Overall KHC ranks 6th on our list of 8 Best Value Stocks to Invest In According To Warren Buffett. While we acknowledge the potential of KHC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than KHC, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
