On Feb. 13, Kraft Heinz (NASDAQ:KHC) stock fell 8% … and Kraft Heinz stock fell another 4% Feb. 14.
That came after Kraft Heinz reported a 5% drop in sales for the fourth quarter of 2019.
Kraft Heinz beat on earnings — coming in at 72 cents per share, above Wall Street’s estimate of 68 cents. However, revenue came in at $6.54 billion, below expectations of $6.6 billion.
Also, while Kraft Heinz’s net income came in at $182 million, switching from a net loss of -$12.57 billion a year ago, the other year-over-year numbers did not look great.
Adjusted earnings per share (EPS) are down 14.29% from 84 cents a year ago. And revenue came in 5.1% lower than the year ago’s quarter.
That huge loss from a year go stems from Kraft Heinz writing down the value of its flagship Kraft and Oscar Mayer brands by an astounding $15.4 billion in 2019.
Those “impairment charges” continued during its latest quarterly report, with Kraft Heinz writing down $666 million, including $213 million on its Maxwell House coffee brand alone.
One InvestorPlace analyst has been on the Kraft Heinz stock beat for years now – and he’s been recommending that his subscribers bet against Kraft Heinz stock for more than two years.
Here’s what he had to say late last week:
How to ‘Marie Kondo’ Your Portfolio
“This was just the latest in a long stretch of similarly miserable results for Kraft Heinz, which formed in 2015 in a merger of old, tired food giants,” InvestorPlace analyst Eric Fry said last week. For InvestorPlace, Fry is the editor of the free Smart Money eletter and Fry’s Investment Report and The Speculator.
“So it’s no surprise that Kraft Heinz’s stock has plunged over 70% in the past three years – and 40% in the past year alone,” he said.
In a recent column sent to his subscribers, Fry suggested that investors apply the “Marie Kondo method” to their portfolios in order to avoid big drops like the ones Kraft Heinz stock owners saw last week.
Marie Kondo is the “decluttering” guru and author of The Life-Changing Magic of Tidying Up who suggests asking one simple question to determine if items should stay or go from one’s household.
That question: Do the items you wish to keep “spark joy?” If not, they’ve got to go.
“This tactic can work wonders on an investment portfolio,” Eric Fry said last week. “It could declutter a pile of stocks just as effectively as a pile of socks.
As far as Kraft Heinz stock goes, here’s what Fry has to say:
Tastes change and trends change. Today’s American diet looks very different from the 1960’s version. And as diets evolve, many iconic brands become less popular and therefore less iconic.
Think of what Kraft Heinz has in its own portfolio: Heinz ketchup and Kraft Macaroni & Cheese, of course … plus processed pantry staples like Jell-O, Oscar Mayer, Velveeta and Lunchables.
Does any of that ‘spark joy?'”
Fry has been on Kraft Heinz stock’s case for a while now.
A Formula for Failure
In mid-2017, he urged his subscribers to bet against KHC stock by buying long-term put options on the stock.
“I based much of that recommendation on the fact that Kraft Heinz’s debt was rising, while its revenues were slumping,” Fry said last week. “But despite these obvious negative trends, Kraft Heinz stock was trading at very lofty valuations.”
The chart below shows that the recent revenue trend at Kraft Heinz has not been a good one.
Less than one year after Fry issued that alert, Kraft Heinz stock was down more than 35%. Two years later, the stock had plummeted more than 60% … and now it’s sinking further.
“Importantly, Kraft Heinz stock tumbled lower even though the overall market was heading higher,” Fry said.
Imagine if you purchased $10,000 worth of Kraft Heinz stock on June 30, 2017, while another investor simply purchased $10,000 worth of an S&P 500 Index fund.
Today, less than three years later, the investor who bought the index fund would be sitting on $14,650, while the investor who bought Kraft Heinz stock would have just $3,500 left from the original investment.
You certainly can’t build wealth by turning $10,000 into $3,500.
The Bottom Line on Kraft Heinz Stock
While many investors thought Kraft Heinz would cut its dividend after its poor quarterly report last week, the company surprised by holding firm on its $0.40-per-share quarterly payout.
That’s led some investors to think Kraft Heinz stock is still worth investing in – that it’s a “turnaround play” that you’ll get paid for holding while it makes its comeback.
“That’s a trap,” Eric Fry now says. “The day after Kraft Heinz reported those disappointing earnings, two ratings agencies downgraded the company’s debt. You can’t escape a downward spiral like this one once you fall in… and neither can Kraft Heinz stock.”
But you can minimize your risk of loss by Marie Kondo’ing your portfolio, Fry says, by purging it of stocks that don’t spark joy.
“You simply can’t afford to hold these stocks in your portfolio any longer,” he says. “However, there are plenty of stocks out there that do spark joy.”
In every sector, new companies are taking advantage of new technologies and completely disrupting the status quo.
Their investors are getting rich.
For 25 more companies all investors should purge from their portfolio, you don’t want to miss a special presentation that Eric Fry put together.
To view it, click here.
P.S. Something remarkable happened to Eric Fry recently while visiting America’s richest ZIP code, which is located far from Manhattan, Palm Beach, and Beverly Hills. First, someone smashed his car windows and stole thousands of dollars’ worth of video equipment.
But the good news is, he also found an incredible opportunity that could make you a lot of money – and it has nothing to do with real estate. Eric thinks this could be his next 1,000% winner. He’s giving away the details here.