Jamie Ward's  Instablog

Jamie Ward
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An equity analyst with several years experience analyzing stocks across geographies and sectors. I make blended valuations but try to identify stocks for which the market is valuing based upon the next 1 to 2 years, but for which I believe that the real value lies what it can become in the next... More
  • Betting Against Buffett Is A Bad Idea 0 comments
    Feb 19, 2013 5:12 AM | about stocks: KHC, BRK.A, BRK.B

    I have seen a number of articles criticizing Warren Buffett's Heinz (HNZ) deal. The thrust of most criticisms seems to be that 'its a Buffett stock, but not at a Buffett price'.

    This is missing the point. In a background of extreme monetary expansion, there is a material risk of persistent 5%+ inflation. Branded goods companies have a tremendous ability to pass on inflation, therefore 4.75% earnings yield (21x PE) is a real yield, not nominal. Add in the fact that there is a degree of conventional debt being used, which will be eroded by inflation and, in 10 years time, this deal may well look like a very good investment indeed.

    Betting against Buffett has been a terrible idea for a long time and in my opinion it remains a terrible idea today.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: KHC, BRK.A, BRK.B
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