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“I’m sorry, Junior. But Ketchup is not a Food Group” (KHC)

Posted on October 2, 2019

In our ongoing battle for nutritional supremacy, we’ve decided to move deeper into the field of publishing, penning what we believe will eventually become the Ur-text of all gut-happy, keto-friendly, GAP- and AIP-approved bullet-proof eating for centuries.

The book’s tentatively entitled Thus Sauteed Zarathustra, and though it’s still in beta (as they say), we’re confident the first printing will end up a collector’s item.

So keep your eyes peeled and wait dutifully for your Amazon Gift Card to arrive.  It’s the one book no home library should be without.

There, there, Rudolf.

Now back to investing!

No, ketchup is not a food group, but it may be the most underrated stock condiment going.

And that’s not to say anything about macaroni and cheese.

Yep.  You guessed it.

Our trade today is with none other than Kraft Heinz Co. (NASDAQ:KHC), purveyors of edible poisons for over 150 years.

Yes, the company’s shares have been squashed for nearly three years, falling from a tomato red high of $98 to a powder-like, cheesy low of just $25 in August.

But valuations look brighter for that, and the company has done a great deal of soul-searching to remedy the sad decline of their stock.

And Now…?

Consider the following –

  • KHC has a 5.69% annual yield,
  • A Price to Book ratio of 0.67,
  • A negative P/E (forward P/E is just 10.7),
  • And, as mentioned above, a difficult workplace atmosphere.

Consider, too –

Last month, two insiders, Alexandre Van Damme and Jorge P. Lemann, bought over $100 million of KHC stock!

A good omen.

And now to the charts…

This is the monthly, and it illustrates well the length and depth of the stock’s decline.

But note, too, 1) the positive divergence (in green) over the last half year, coinciding with 2) the massive turnover in shares (in black).  This is a sign of accumulation and it bodes well for KHC bulls.

Now the weekly –

We’re generally of the opinion that major turns in share price occur only after all the salient moving averages are unwound and trending together – in this case, lower.

  1. This occurred precisely half a year ago, offering the possibility for a change in trend (red arrows).
  2. An oversold RSI read in May is also indicative of a bottom (circled, in red).
  3. Positive divergence since that time offers an additional indication that we’re witnessing a turn (in green).

Now the daily chart –

Four separate, daily oversold readings (in red) and more positive divergence (in green) ice the cake.  It’s very likely the bottom’s in.

And one more thing.

Since the insiders bellied up to the bar, KHC stock has outperformed the S&P 500 by a wide margin.  In the month of September, they were up as much as 19%, against the S&P’s 5.5%.  And they finished the month ahead by 11.5%, to the S&P’s smaller, 4.5% gain.

And we’re playing it like this –

A Jew and His Gold recommends you consider selling two (2) KHC December 20th 25 PUTs for $0.85 each and buying three (3) KHC December 20th 30 CALLs for $0.60 each.  Total debit on the trade is $0.10.

Many happy returns,

Matt McAbby

 

One response to ““I’m sorry, Junior. But Ketchup is not a Food Group” (KHC)”

  1. L Dorfner says:

    Your expected break higher for the ketchup people reminds me of that old ad jingle:
    ANTICIPAY-AY-TION…
    https://youtu.be/0IobpIKshr8

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