Investors are eating up shares of Kraft Heinz — here’s why

Kraft Heinz earned some praise from the Warren Buffett crew at Berkshire Hathaway’s 2021 shareholder meeting. Yahoo Finance's Brian Sozzi shares the details.

Video Transcript

JULIE HYMAN: Shares of Kraft Heinz, well, they hadn't really gone anywhere for a couple of years until very recently. And they got a little help from some high profile folks. Brian Sozzi, that is the subject of your take today.

BRIAN SOZZI: Yeah, I got an alert on Friday afternoon when the market closed that shares of Kraft Heinz, the mac and cheese maker, touched a new 52-week high. So I dug into this a little more. Kraft Heinz shares up 6% so far in May, and it is one of the top performing packaged food companies around, easily outperforming PepsiCo and Coca-Cola. And I think it all began with what we heard from Buffett likely successor Greg Abel at the annual shareholder meeting earlier this month. Here's what he said on Kraft Heinz.

GREG ABEL: I think we're very comfortable with the fact that they put a strong manager in place in Miguel. And he's put a very good team in place at Kraft Heinz. So we're pleased with the leadership and management team in place. They're very focused on how they're executing as they've gone forward and rationalizing their capital structure and managing down their debt structure. So, very pleased with the path.

BRIAN SOZZI: So that vote of confidence I'm calling the Buffett effect really, I think, just lowering concerns out there in the market that Buffett, which owns about 26% of Kraft Heinz, largest shareholder, will be out there dumping stock. Number two, new CEO Miguel Patricio, which Abel mentioned there, has been making a lot of deals. Sold off the Planters business for billions of dollars, sold off their cheese business for billions of dollars.

And there's still expectations that they have more deals to do over the next 12 months as they slim down their portfolio and look to cut more expenses. And last but not least, first quarter results for Kraft very solid across the board. US international quieted its fears that demand will fall off a cliff later this year. Put all that together, that's when you have Kraft Heinz coming back from the abyss.

MYLES UDLAND: Well, Sozzi, I also ask-- you know, you follow the food space closely as well. This is a branded portfolio, right? You're buying Philadelphia Cream Cheese, which is more expensive than ShopRite cream cheese or whatever. Is this the kind-- and we've seen a lot of these branded portfolios thrive during COVID as people are spending more time in the grocery store. Does that cyclical part of this story, is that a risk here, or do you think that there's maybe some legs here?

BRIAN SOZZI: There is some-- there's some legs here. Now will this business, Kraft Heinz, will they be growing at the same rate later this year than they did at this point last year? No, that's what package food has to deal with this year. I mean, you're not having consumers out there that are stocking up aggressively on packaged food. But where I think you're also seeing with Kraft Heinz is the early innings and appreciation by investors that they have a lot of expenses to cut and a lot of expenses to cut that could offset a lot of the inflation that they are dealing with, just like others in this space.