I Bought Campbell Soup Shares In Compensation For My Heinz Stake

Yesterday was a bad day because Warren took one of my long-term investments, Heinz (HNZ), to take the company private. He paid a price of $72.50 and gave me a total return including FX-Gains of 24 percent. The total purchase price is 23.25 billion. Most of the value goes on Buffett’s accounts.

Warren buys Heinz at a P/E of 22.73 and a yield of 2.84%. All price ratios are not cheap especially when you look at mid-term growth rates. But more interesting is the alternative in a low interest environment. I believe that the current yield covers a big part of the long-term loan of the deal and as a private company, there are much more possibilities.

However, as I heard the news yesterday, I needed to search alternatives for the free money. I decided to pull the trigger for a buy of 100 Campbell Soup (CPB) shares. My CPB stake is worth a little bit more than the old Heinz position. I am really worried about the lower possibilities on the market. In my niche, good investment vehicles getting rare and I must focus or concentrate more money on less stocks.

The whole industry realized a quick cash injection yesterday. I don’t know why exactly. Mostly because Warren's buy is a clear signal from one of the most trusted investors. Beyond, there are now $23 billion of additional cash in the market which must be invested on the rest of the industry players. As a result, prices for all competitors must increase.

Heinz was bought for an EV/EBITDA ratio of 13x. CPB has a ratio of 9.64x. The current P/E is 16.41 and the yield amounts to 3.0 percent. I still own several major players from the industry. CPB was a lack in my portfolio. That’s the main reason.

Damn! Warren Buffett Snaffled Heinz

A few months before, I bought a small position of 50 Heinz Shares for my private accounts. It was on December 3, 2012. The purchase price was around $64.

Today, the company will be taken over by Warren Buffett and the investment firm 3G for a price of $72.50 in cash, a premium of 20%. This is also the return for around 10 weeks of owing the stock.

My gain should be around $600. I am not happy because I couldn’t increase my stake. I bought only a few shares and wanted to increase the position over the next years to a core investment share of 2-3% of my full portfolio worth.

Warren bought several stocks I own and I purchased some he had. So, I believe he has a great taste in searching for the best stocks. This year I received two takeover offers: NYX and HNZ. Normally I get 2-4 per year.

Investing is a hard fight for the best companies. Heinz was not expensive but growth of the company is also not in a double-digit region. Heinz has a great international diversification and the market for sauces is developed. So, it's very hard for competitors to enter.

Who will be next?

My Heinz (HNZ) Stock Trade Report | A Solid Dividend Growth Stock In My Portfolio

Today I made a buy of 50 Heinz shares. The total amount was USD 2.926,50 and will increase my dividend income by around USD 100. It's my first position ever in Heinz. I avoided the company in the past because of the high debt ratios. For the time being, Heinz has USD 5.04 billion debt at a twelve trailing months EBITDA of 2.02. I thought that this ratio is too high for a slow growing business. But as you could see, I was wrong not to buy the stock when the yield was above 4 percent. Heinz has a strong market position and well-known brands. The company is traded near All-Time-Highs. The company has also USD 1.01 billion in cash, so the net-debt to EBITDA ratio is lower. I plan to increase this position over the next decades.

Heinz is definitely no stock to get quick rich. The yield of 3.5 percent will not boost your dividend income and I don't expect bigger dividend hikes over the next few years due to the high debt and slow growth of around 3-10 percent. What do you think about the company and their business developments?