Warren Buffett is a major shareholder of Kraft Heinz.
Buffett described his purchase of Kraft Heinz as a mistake.
Investors have an attractive opportunity to avoid the kind of mistakes that Baft made with Kraft Heinz, which is now available.
10 Better Stocks than Pepsi›
Warren Buffett is known as Omaha's Oracle Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B)for many years. But Buffett is very open and even he doesn't have complete clarity on the future of stock prices. He is willing to tell investors when a mistake has been made, and that's how he describes himself buying consumer giants Kraft Heinz (Nasdaq: KHC).
That's what happened and why you might want to avoid Buffett's mistake by buying other deep, productive consumer staple dividend kings.
The material part of Warren Buffett's investment training comes from Benjamin Graham. Some call Graham the father of Basic Analysis, and some consider him one of the most famous value investors of all time. No matter what perspective you take, he has an interesting point of view on investing. Explain with one of his most important mottos, even a good company can be a bad investment even if you pay too much for it.
This is Warren Buffett’s mistake here, food maker Kraft Heinz. The company has a large number of brands and has a long history to manage its brand portfolio to keep up with consumer buying habits. But even good companies have gone through tough times. When Buffett bought Kraft Heinz, it was basically in the transition period. In fact, part of the merger of Kraft and Heinz is aiming to reduce costs by reducing corporate inflation.
This is a good goal, but cost-cutting is not a long-term business plan, and management has turned its attention to the ball. This led to a lot of value written down by some of Kraft Heinz's brands, which Buffett basically admitted, suggesting that he overpaid for consumer Staples Company.
The truth is, Kraft Heinz may be in a good day, but its turnaround efforts are still underway. Most investors should probably stay away. but Pepsi (NASDAQ: PEP)It's a completely different story, down about 30% from its 2023 high. Now, this dividend king stock looks cheap.
First, Pepsi's 4% dividend yield is close to the highest level in the company's history. This should attract dividend investors and those looking for stocks that are selling. At the same time, the value proposition is supported by the stock's price to sell price, price-to-earnings ratio and price ratio, all below its five-year average.
As for the business, Pepsi remains one of the largest beverage companies on the planet, the largest savory snack manufacturer (Frito-lay), and has a strong position in packaged foods (Quaker Oats). It is one of the most diverse food companies you can buy. Despite its recent weak financial performance, Pepsi's scale and business advantages, a marketing, R&D and distribution power, may help it turn things around in a timely manner.
After all, you won't send out the king status by chance. It requires a strong business model that executes well in both good times and bad times. For example, the key part of Pepsi’s success comes from gaining emerging brands. It recently purchased Mexican-American food company Siete and plans to buy prebiotic maker Poppi. Both are in a trend state and should help lay the foundation for future growth. So unlike Kraft Heinz, which plots different routes and gets lost, Pepsi looks like it is following its North Star despite the current rough ocean.
While you want to avoid paying for any stock, if you buy Pepsi, you will want to follow an important Buffett approach. This is a long-term investment. Pepsi has some work to do to get its business back on track and it may take some time to turn things around. However, stocks look cheap and high yields will stick with them as you wait for a better day.
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Reuben Gregg Brewer has a position in Pepsi. Motley fool has a place and recommends Berkshire Hathaway. Motley Fool recommends Kraft Heinz. Motley Fool has a disclosure policy.
Learn from Warren Buffett’s mistakes. Buy this high-yield stock when Wall Street doesn't like it. Originally published by Motley Fool