Wall Street legend Warren Buffett is known for his value investing strategy. However, every investor experiences stocks that go through down periods, and Buffett’s portfolio is no exception. Today, we’ll take a look at two underperforming stocks in Buffett’s portfolio: Kraft Heinz and Bank of America Corporation.
Kraft Heinz (KHC) is one of the largest food and beverage companies in North America, owning popular brands like Philadelphia cream cheese and Jell-O. While KHC stock has underperformed this year, Buffett has not reduced his holdings. In fact, Berkshire Hathaway, Buffett’s firm, holds over 325 million shares of KHC worth $10.89 billion. The company generated $26 billion in total revenue last year and has 8 brands that generate over $1 billion annually. While their Q2 top line grew 2.55% year-over-year, they missed the forecast due to a 7% drop in volume. However, the company’s EPS of 79 cents beat expectations.
Bank of America Corporation (BAC) is one of the world’s largest banking firms. Despite BAC shares declining 11% this year, Buffett’s firm still holds over 1 billion shares, making up 8.5% of their portfolio. Bank of America’s total revenue grew by 11% year-over-year, reaching $25.2 billion in Q2, with a net income of $7.4 billion. The bank is known for its strong capital return policy and recently increased its dividend by 9%.
Analysts have mixed opinions on these stocks. Deutsche Bank’s Stephen Powers is bullish on Kraft Heinz, citing their improved fundamentals and supportive valuations. He has a $47 price target, suggesting 40% share appreciation. Bank of America’s size is seen as an overall positive by Wells Fargo analyst Mike Mayo. Despite its strong dividend history, Mayo does not recommend the stock.
In conclusion, while these stocks may be underperforming currently, Buffett’s long-term investment strategy and confidence in their potential for recovery is evident. Investors should carefully consider these stocks and the opinions of analysts when making investment decisions.
Definitions:
– Value investing: A strategy where investors seek stocks that are priced significantly below their intrinsic value.
– Compounding returns: The process of earning returns on both the original investment and the returns from past investments.
– Dividend stocks: Stocks that pay out regular dividends to shareholders.
– Passive income: Income earned from investments or assets without actively working.
– Gigantism: Describes something that is very large or oversized.
– Deposit: Money placed in a bank account for safekeeping or to earn interest.
Sources:
– Click here for Stephen Powers’ track record: (source)
– KHC stock forecast: (source)