It's another Black Friday, and that means bargains galore, provided you are up for the pushing, shoving, traffic and chaos. I'd rather not participate; rest assured that I am writing this in the western Pennsylvania comforts of my in-laws' home and not in a long line of angry shoppers outside a Best Buy. I suspect that a car load or two from here will be hitting the local outlets later, once the dust has settled and arrests have been made.
I am instead looking for bargains in the markets. As the luster has faded and various stocks have entered negative territory, there just might be some bargains emerging as 2018 limps to a close.
Within large-caps, where I tend to shun individual names because it is one area of the markets that I believe is fairly efficient, I am surprised to see the plight of food giant Kraft Heinz Co. (KHC) . Down nearly 35% year to date, Kraft Heinz trades at around 14x next year's consensus earnings estimates and yields about 4.9%. Markets haven't been excited about post-merger earnings or revenue growth since the 2015 combination of Kraft and Heinz; there also may be some concerns about the sustainability of the dividend.
But, if you want to invest alongside Warren Buffett, this is one potential way to do it as Berkshire Hathaway (BRK.B) owns more than 26% of Kraft Heinz. As a value investor, I also noted that KHC trades below book value, at 0.95x. However, the company's book value is comprised primarily of intangible assets; while those assets may have considerable value given the company's well-known and iconic brands, I don't get as excited about intangibles as I do over tangible assets.
DowDuPont Inc. (DWDP) spinoff Chemours Co. (CC) has had a rough run in 2018, too, and is down about 40%, despite a nice run of better-than expected earnings results. However, lowered guidance for the fourth quarter hurt recently and many names in the chemicals space are feeling the pain. Damage to Chemours seems to be getting out of hand, though, as it trades at just 5x next year's consensus estimates.
Currently yielding about 3.4%, Chemours increased its quarterly dividend 47% to 25 cents a share in August. At the same time, the company unveiled a $750 million stock buyback plan that will run through 2020. As I've stated previously (ad nauseam), I like the potentially powerful combination of growing dividends and stock buybacks. When done properly, thoughtfully and with follow-through, they are demonstrative of a confident management team.
Happy shopping today, for those who have or will be venturing out into the chaos!
