And Kraft Heinz stakes: The big pic­ture

Financial Mirror (Cyprus) - - FRONT PAGE -

the case that in­vestors can re­ceive bet­ter div­i­dend yields in tele­com than they can in tobacco. AT&T’s stock drop in 2015 now gives it a yield of al­most 5.8%, and Ver­i­zon’s pull­back from highs has its div­i­dend just shy of 5.0%.

Kraft Heinz is the stake that should stand out the most to in­vestors. It was al­ready well known that Buf­fett was an in­vestor in Kraft Foods and separately was a par­tic­i­pant, along with 3G Cap­i­tal, in Heinz. Then that merger of the two food gi­ants gave Berk­shire Hath­away a mas­sive stake in the com­bined com­pany.

Kraft Heinz was for­mally listed as a huge 325,634,818 shares, worth al­most $23 bln at the end of Septem­ber. That stake was listed as be­ing over $23.5 bln all-in on Kraft Heinz, as of the pre­vi­ously re­leased Septem­ber 30 bal­ance sheet. The 13F fil­ing of the full hold­ings showed the stake as be­ing worth $22.98 bln.

The Kraft Heinz stake had been pre­vi­ously writ­ten about in Berk­shire Hath­away’s third-quar­ter earn­ings and bal­ance sheet doc­u­ment. That spec­i­fies how the trans­ac­tion looks and in­cludes data about 3G, stated as fol­lows: “Berk­shire’s ini­tial in­vest­ments con­sisted of 425 mln shares of Heinz Hold­ing com­mon stock, war­rants, which were ex­er­cised in June 2015, to ac­quire ap­prox­i­mately 46 mln ad­di­tional shares of com­mon stock at one cent per share, and cu­mu­la­tive com­pound­ing pre­ferred stock with a liq­ui­da­tion pref­er­ence of $8 bln. The ag­gre­gate cost of th­ese in­vest­ments was $12.25 bln.”

3G also ac­quired 425 mln shares of Heinz Hold­ing com­mon stock for $4.25 bln. In ad­di­tion, Heinz Hold­ing re­served 39.6 mln shares of com­mon stock for is­suance to its man­age­ment and direc­tors un­der eq­uity grants, in­clud­ing stock op­tions.

What has to be kept Hath­away’s quar­terly ap­prox­i­mately 58% of in mind now is fi­nan­cial fil­ing the ag­gre­gate that Berk­shire showed that fair value was con­cen­trated in the eq­uity se­cu­ri­ties of just four com­pa­nies. Th­ese were listed as fol­lows:

- Wells Fargo & Co. (NYSE: WFC) as $25.2 bln;

- Coca-Cola Co. (NYSE: KO) as $16.0 bln;

- In­ter­na­tional Busi­ness Ma­chines Corp. (NYSE: IBM) as $11.7 bln;

- Amer­i­can Ex­press Co. (NYSE: AXP) as $11.2 bln;

Now insert the more ex­panded eq­uity value of $127.4 bln rather than the $106 bln prior grand to­tal. The $22.98 bln for Kraft would now come to a rounded $87.1 bln. Fu­ture fil­ings may say that Berk­shire Hath­away’s pub­lic eq­uity hold­ings are now dom­i­nated by five com­pa­nies, com­pris­ing about 68.4% of the value of the pub­lic eq­ui­ties port­fo­lios.

Buf­fett’s lat­est port­fo­lio changes looked very dif­fer­ent from past changes. It turns out that there were ex­cep­tions and rea­sons for each. In­vestors al­ways need to con­sider the logic be­hind what they see re­ported just on a static ba­sis as if there is really a vac­uum.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.