Kraft Heinz ([KHC]) has decided to split the company into two entities. We examine the past decade for the stock from a technical perspective.
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While many likely utilized their products the past weekend due to the official kickoff to college football, Kraft Heinz (KHC) decided to run an audible and split the company into two entities – one focused on the Oscar Mayer, Lunchables, and Kraft Singles brands, and one consisting of Heinz, Kraft Macaroni & Cheese, and Philadelphia brands (Source: Kraft Heinz). Originally backed by Berkshire-Hathaway (BRK.A/BRK.B) and 3G Capital (sold their stake in 2023), this year marked a decade of existence for the food giant after Kraft Foods and Heinz merger in July 2015. Current shareholders of KHC will receive shares of the newly formed companies, with both the names of the companies (currently Global Taste Elevation Co. and Noth American Grocery Co. are placeholders) and dates of the new shares trading to be determined later.
While Kraft Heinz is spinning the separation of the various brands to create two more efficient companies, investors will see if shareholder value can truly be built. From a technical perspective, the past decade hasn’t been positive. KHC has maintained a negative trend since 2017 and exhibited negative market and peer relative strength since 2023. While KHC has been a 0 for 5’er and on a sell signal on its default point and figure chart for over two years, the stock has possessed a low technical attribute (TA Rating of 2 or less) for 89% of the time since trading began. In fact, KHC has been unable to possess a 4 or 5 TA rating and only maintained an acceptable technical attribute (TA Rating of 3 or greater) for just over a year’s time within the past decade. As of Friday’s (8/29) close, KHC has underperformed the S&P 500 Index (SPX) by over 270% on a price return basis and 230% on a total return basis.
While examining performance with hindsight would suggest KHC wasn’t the best stock for a portfolio, the technical attribute rating system highlighted the weakness within the stock. By weeding out low technical attribute positions within a portfolio, NDW users are able to rotate to stocks that are in favor and avoid long-term underperforming positions, like a KHC.
