Speculation Swirls That Warren Buffett Is Planning to Sell Kraft Heinz Stock (KHC)

Warren Buffett’s holding company Berkshire Hathaway (BRK.B) has given up two seats it held on the board of directors at Kraft Heinz (KHC), leading to speculation that the legendary investor plans to sell his sizable stake in the packaged food giant.

Berkshire Hathaway currently owns 325.6 million shares of KHC stock, which represents a 27% stake in Kraft Heinz that’s worth $8.7 billion. The investment in the maker of ketchup and Philadelphia cream cheese has been one of Berkshire Hathaway’s worst, and Buffett himself has grumbled about it publicly in the past.

Berkshire participated in the buyout of Heinz in 2013 along with 3G Capital, and then rolled that equity interest into Kraft when the two companies merged in 2015. Berkshire also made an additional investment in Kraft at that time. KHC stock is down about 65% over the past decade and now trading at $26.50 a share.

In the Red

Buffett has said that Berkshire Hathaway’s cost basis in Kraft Heinz is around $9.8 billion, which suggests the company is in the red on the investment. Speculation that Buffett may now be planning to offload the Kraft Heinz shares comes as news spreads that the two Berkshire Hathaway directors on Kraft Heinz’s 12-member board, Alicia Knapp and Tim Kenesey, have stepped down.

In a note to clients, TD Securities wrote, “While there is nothing in the press release about what Berkshire plans to do with its 27% stake in the company, our guess is that they will start selling this year.” Other analysts note that it’s easier for an investor to reduce a large stake when none of its representatives are on the company’s board because of restrictions around the timing of stock sales.

News that the two Berkshire board members have stepped down from Kraft Heinz’s board has sent KHC stock down about 5% and to a new 52-week low. BRK.B stock is up 12% on the year.

Is KHC Stock a Buy?

The stock of Kraft Heinz has a consensus Hold rating among 14 Wall Street analysts. That rating is based on 11 Hold and three Sell recommendations assigned in the last three months. The average KHC price target of $29.14 implies 9.84% upside from current levels.

Read more analyst ratings on KHC stock