We covered the Kraft Heinz Company's (NASDAQ:KHC) Q4 2018 earnings which were a rather epic disaster. Our take then as the stock dropped below $40 was "You Can't Touch This." As the stock moved lower further and sentiment soured further, we followed up with another piece where we summarized our take as:
We want to get involved here but with a wider than average margin of safety. At $28/share, the EV to EBITDA will be under 10X, a point we can safely say that risk reward will be firmly in our favor. On our now very famous scale of 1-10, where 1 would be "Avoid like the bubonic plague" and 10 would be "Buy like this is Apple in March 2009," we would rate KHC a 5.0, with a $28 price warranting a 6.0. With that in mind, we will be looking at selling the right puts to establish our long position.
We did get $28/share. Do we buy or do we chicken out? We give you our latest take below.
Problems galore
KHC investors, especially those that forked over nearly $100/share for this company in 2017, must be hating the day they heard of this company. If the earnings disaster and dividend cut were not bad enough, KHC also dropped numerous other bombshells on investors.
First, we heard from Warren Buffett (and not from KHC) that KHC was not exactly making its auditors happy.
"The auditor, which is PricewaterhouseCoopers in this case, hasn’t signed off on the 10-K,” Buffett told a group of reporters ahead of Berkshire Hathaway’s annual meeting at the CHI Health Center in Omaha, Nebraska. “They have to explain why they haven’t signed off, but they haven’t signed off... There’s something going on.”
"There's something going on" is not what you want to hear from the largest
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