Berkshire Hathaway's Heinz Deal Fails to Inspire Wall Street

Talk about a day with big news and little movement. It seems that has become the norm on Wall Street recently. Berkshire Hathaway's (NYSE: BRK-B  ) $28 billion deal to buy H.J. Heinz (UNKNOWN: HNZ.DL  ) has not much inspired investors to bid up stocks: As of 3:25 p.m. EST, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) is up a single point, while the S&P 500 (SNPINDEX: ^GSPC  ) is up 0.15%.

Berkshire Hathaway will pay $72.50 per share for Heinz, or $23 billion for the company's equity, while assuming $5 billion in debt. In a fairly unusual move for Warren Buffett, he will own more than half of the company while investment firm 3G Capital will be in charge of operations. If you want a peek into Buffett's strategy, look no further than the brands he has acquired over the years. GEICO insurance, Benjamin Moore paint, Fruit of the Loom, Dairy Queen, BNSF Railway, and large stakes in Coca-Cola (NYSE: KO  ) and Heinz have been folded into the Berkshire empire. Big brands are one of the great competitive moats for companies, and that is clearly one of the qualities Buffett looks for in his investments.

Speaking of Buffett and big brands, Coca-Cola once again ranks among the Dow's biggest losers, 1.1% near the end of today's trading session. This is the third straight day the company has been among the Dow's biggest losers after reporting earnings, but today Pepsi's strong earnings stung the stock. Pepsi's profit rose 17% in the fourth quarter, driven by higher prices, and the company announced a $10 billion share buyback. Following a disappointing report from Coke early in the week, this is salt in the wound for Coke's investors. In the long term, this doesn't mean Coca-Cola is doomed, but Pepsi's stock may be the hotter commodity of the two right now. 

Thinking about buying into Berkshire?
With Buffett at the helm, Berkshire Hathaway has grown book value per share at a compounded annual rate of 19.8% for nearly 50 year. Yet despite that incredible historical track record, investors have to understand the key issues to watch moving forward. To help investors, the Fool's resident Berkshire Hathaway expert, Joe Magyer, has created this 
premium research report on the company. Inside you'll receive ongoing updates as key news hits, as well as reasons both to buy and to sell the stock. Claim a copy by clicking here now.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2256735, ~/Articles/ArticleHandler.aspx, 10/22/2014 8:47:25 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement