Right now, shares of Kraft-Heinz trade at $71 per share. The dividend yield sits at 3%. For a food conglomerate that has spent the past fifteen years growing revenues at 3%, you might ordinarily expect to generate 8% long-term returns according to the following assumptions: (1) you pay fair value for the company, (2) the 3% annual revenue growth translates into 5% earnings per share growth, and (3) you collect the dividends as cash rather than choose to reinvest.
What makes Kraft-Heinz especially intriguing right now is that second element: how revenue growth translates into earnings growth.
Peter Brabeck-Lemanthe, the Chairman of Nestle, provided a telling a quote on how the 3G management team is quite different from ordinary corporate management: “3G and Warren Buffett have pulverized the food industry market, particularly in America with serial acquisitions. 3G’s partners are known in our industry for ruthless cost-cutting and have already … Read the rest of this article!