Mar 25, 2015

Kraft and Heinz Merged to Create World's Fifth-Largest Food Company

Kraft announced a merger with H.J. Heinz Co., which is owned by 3G Capital and Berkshire Hathaway. This new company, called Kraft Heinz Co., is the fifth-largest food and beverage company. As a result of this development, Kraft’s stock price went up by over 30%.

Kraft announced a merger with H.J. Heinz Co., which is owned by 3G Capital and Berkshire Hathaway. This new company, called Kraft Heinz Co., is the fifth-largest food and beverage company. As a result of this development, Kraft’s stock price went up by over 30%. While we could not have and did not predict this event, this transaction validates our approach of investing in fundamentally sound and cash generating businesses at the right valuation for a long time horizon. It is apparent to us that the strength of Kraft’s business model, widely recognized brands, cash-flow generation capability, management and valuation appealed to ace investors, such as 3G Capital and Berkshire Hathaway.

It is the strength of our investment process and the valuation discipline which allows us to take advantage of market inefficiency by steering our client’s capital towards superior businesses, such as Kraft. When we identify and are able to buy such businesses at a discount to our intrinsic value estimate, we are patient in allowing the company to compound our capital for long periods of time without worrying about short term market prices. This patient approach allows us to participate and benefit from special events such as this merger. Our investment in Kraft since April 2012 is a fine example of our investment process at work. A little bit of “luck” does no harm in life and in investing.