r/investing
Package foods consumer staples
User questions why packaged food staples like KHC and GIS have high debt and negative sentiment despite high yields.
- High dividend yields offer attractive income potential for value investors.
- Contrarian opportunity as suggested by Rick Rule to 'buy the hate' in out-of-favor sectors.
- Non-correlated returns provide portfolio diversification benefits akin to Ray Dalio's strategy.
- Sector-wide burden of massive debt raises concerns about financial health and interest rate sensitivity.
- Overwhelmingly negative sentiment from analysts and YouTube commentators suggests fundamental issues.
- Historical underperformance exemplified by Kraft Heinz being labeled a major investment failure.
I have been looking to add to my 15-20 core stocks with non correlated returns like Ray Dalio suggests. I was looking at Campbells soup, Kraft Heinz, and General Mills, as well as a few others in the sector.
WTF is with these companies they have massive dividend yeilds and all the YouTube analysis hates them. Rick Rule says buy the hate. But they all have a mountain of debt. What gives? Im trying to find out why they took on so much debt.
It seems like if its a company in the grocery store and convenient store and it sells a bunch of packaged food consumer staples it has a mountain of debt and everyone hates it.
I tried looking up the history of this but I can't find an explanation. Aside from Kraft Heinz being "warren Buffet's worst pick"... but that doesn't explain General Mills or anything else in this sector.
What's the story?
Avoid them, terrible businesses to own.
No control of input inflation, labor issues, pricing and shrinkage, constant design for value I.e. reducing quality, consumer changes, economic conditions. So many factors they don't control, hard to invest in companies like this that are rag dolls in the big picture.
Buffett has said his worst stock was berkshire hathaway. That's a fact
I was referring to what YouTube was saying not what Buffet himself said. Buffet making a "bad bet on Kraft Heinz" was the point and the general attitude of other social media platforms. I was referring to YouTube sentiment not Buffet himself.
I want to know the story of this sector and why everyone hates it
KDP dropped down immediately but tbey acquired jde peets (peets coffee) and will split into soft beverages and coffee companies. People are sleeping on this one, I think. 125 soft beverages and dr. Pepper is second leading soft drink in the US, it surpassed Pepsi. Split should happen by early next year. Idk i have a couple hundred shares and its one of a few that went up on Friday
Why put your good money in shitty companies? That's just bad investing.
Im looking for the best in sector, stuff that's undervalued. Stuff that has nothing to do with the hot stuff in the AI and financial bubble thats about to crash a few months from now.
Again, it the entire sector is structurally impaired, there is no such thing as best. Least terrible is still terrible. I predict a wave of dividend cuts in this sector because of the performance deterioration. This isn't a one year thing, all of these companies have been eroding for the last decade. These are not safe investments. I would rather own treasuries than cpg stocks.
dividend yields with Campbells, Kraft Heinz, etc. are high because their growth is slow. they're staples, so in bad economies, they maintain demand. income-focused investors eat up those dividends, imo.
There's not much growth with consumer staples compared to tech.
I like boring money... but it doesn't explain the debt
Dalio refers to uncorrelated asset classes. if you're looking to insulate yourself when the bottom drops out, you need investments that literally are unrelated to equities. Dalio's "all weather" strategy incorporates stocks, bonds, gold and commodities.
I am a "buy 'em when they're hated" guy, but not in that sector anymore.
Not enough people don't want the stuff they're selling anymore.
Look at 5 or 10 year charts of any of them and ask yourself what is going to change.
Thats the Idea is Buy the hate.
It seems that Private equity got their hands on the sector and loaded it up with debt.
On the one hand maby the sector is just bad, on the other hand they are scheduled to unwind their debt soon, if Private equity gets taken out in this current bubble maby they have new life, the problem is which one might the most new life. . The more I look into it seems like its unsalvagable garbage no body wants or should want.
My instinct says there should be a deep value play here, but everyone is saying no.
From a Campbells perspective, it's had a lot of bad PR, as well as this upcoming generation isn't that interested in it. healthier brands are more the trend. I think it comes down to asking yourself if you know anyone who buys the products. I don't know anyone that buys campbells soup so I'm not too interested in owning it. For my consumer staples defensive selections, I go with an ETF because I see dividend companies like Nike (NKE) slowly circling the drain year after year despite dividends. I don't want to go into deep fundamentals analysis on dozens of companies in the dividend and defensive sectors and track them over time when it seems like titans of old are slowly dieing, just not enough time in the day to research that for every strategy pivot I make.