"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
- Warren Buffett
Kraft Heinz Co. (KHC) is the third largest holding in Warren Buffett's (Berkshire Hathaway (BRK.A) (BRK.B) ) portfolio but it has been in a downtrend since February of 2017. The downtrend accelerated in June and it does not look like prices have bottomed yet. If you do not have the patience and deep pockets of Warren Buffett I suggest you read the rest of this article and make a decision on whether to hold or stand aside waiting for a better opportunity.
In this daily bar chart of KHC, below, we can see a pattern of lower lows and lower highs -- a downtrend -- from June. Prices are below the declining 50-day moving average line and the declining 200-day line. There is a bearish death (or dead) cross in early August as the 50-day line crossed below the 200-day line.
The daily On-Balance-Volume (OBV) line began its descent in September and signals that sellers of KHC have been more aggressive than the buyers. The trend-following Moving Average Convergence Divergence (MACD) oscillator has been below the zero line for much of the past 12 months. The oscillator crossed to a new sell signal early this month and is still bearish, however, we could see a cover shorts buy signal in the days ahead if KHC rallies.
In this weekly bar chart of KHC, below, we can see that prices are below the declining 40-week moving average line. Prices are testing the extreme lows seen in late 2015. The weekly OBV line sank to new low ground this month as sellers of KHC have been more aggressive. While the daily MACD oscillator could generate a cover shorts buy signal the weekly MACD oscillator is still bearish and pointed lower.
In this Point and Figure chart of KHC, below, we can see the decline from the mid-$90's to the $60's. A price target of $64.12 is indicated suggesting that prices have not hit bottom yet. A rally to $70.85, should it occur, would help improve the short-term picture.
Bottom line: Do you have the patience and the deep pockets to hold KHC? The stock has been in a downtrend. It is still pointed down with a $64 price target. I am not hungry for this investment at this juncture. The fundamental story and the chart picture are not in alignment.