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Warren Buffett Watch
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AP Oreo Cookies, one of Kraft Foods' strong brands, that presumably helped attracted Warren Buffett's buying interest in the company's stock |
Kraft Foods Current Price: [KFT
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Buffett's Kraft Foods stake also helped push other food stocks higher in what one portfolio manager calls a "bit of a halo effect" for the sector that often accompanies news of a Berkshire buy. Bullish forecasts and earnings from H.J. Heinz [HNZ
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], Hormel Foods [HRL
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] and Campbell Soup [CPB
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] also point to better pricing power for the industry, which has been hit by rising agricultural commodity costs.
Edward Jones analyst Matt Arnold tells Reuters that Kraft "is a company with leading, high-quality brands with depressed margins (that) offers significant value if management can restore profitability and drive the top line with product innovation."
Well-known and highly-respected brands, like Kraft's Oreo cookies and Oscar Mayer hot dogs are important to what Buffett calls a company's "durable competitive advantage", a key factor he looks for when buying into a business. (See, for example, his "crazy" 1988 bargain buy into Coca-Cola (now worth almost $12 billion) and his Gillette-generated holdings in Procter and Gamble (now worth about $7 billion.)
On CNBC's Squawk Box this morning, Buffett book author Andrew Kilpatrick of Wachovia Securities, noted that strong brand names "don't appear on a balance sheet" but are valuable nonetheless. Citigroup's Tobias Levkovich also found Buffett's recent interest in large-caps to be interesting.
Another big positive for Buffett is a strong, trustworthy management. Kraft Food spokesman says, "We're pleased with Buffett's vote of confidence... It signals he thinks we are doing the right thing." The company is in the middle of a multi-year turnaround plan under CEO Irene Rosenfeld. (Activist investor Nelson Peltz got some board members after he challenged Kraft's strategy last year.)
Berkshire Hathaway's Current Price: [US;BRK.A
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Data is a real-time snapshot *Data is delayed at least 15 minutes