Why is Daniel Loeb Buying Into Kraft?

Not content to simply keep himself busy with a Yahoo! (YHOO) turnaround, Daniel Loeb is turning to Kraft (KFT). Reuters reports that the hedge funder running $8.7 billion at Third Point made Kraft his fifth-largest position as of July 31, replacing Chesapeake Energy (CHK).

Assuming he’s long the stock, as other reports indicate he is, he’s not the first bull. Warren Buffet at Berkshire Hathaway, William Ackman at Pershing Square, and Nelson Peltz at Trian Fund Management have all owned the stock at times, says Reuters.

KFT Chart

KFT data by YCharts

So what’s there to like? YCharts Pro considers the stock overvalued:

KFT PE Ratio Chart

KFT PE Ratio data by YCharts

Its revenue growth is falling:

KFT Revenue Growth Chart

KFT Revenue Growth data by YCharts

It has a lower profit margin than other food companies including Kellogg (K), Campbell Soup (CPB) and General Mills (GIS). KFT Profit Margin Chart

KFT Profit Margin data by YCharts

It’s possible he likes its cash flow picture:

KFT Free Cash Flow Chart

KFT Free Cash Flow data by YCharts

Or it could be a play on the stock’s coming split. Kraft is spinning off the snacks business from the more attractive grocery side. The market seems to think this could unlock value, although a Wall Street Journal story pointed out it will cost a year’s worth of dividends.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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