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Berkshire Hathaway Inc. Message Board

  • Any thoughts on KFT?

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    • My best guesstimate is that KFT has averaged about seven cents in free cash flow to equity per dollar of revenue over the last three years and has grown revenue by about 3.5% per year over the last ten years. At the current price of $31.45 per share and a trailing revenue per share of about $24.29, I believe KFT should generate an annualized total return of about 9%. I wasn't overwhelmed by that, but nevertheless did make a buy at $29.98 on March 17th of this year. The dividend yield alone is better than what I'm making on my money market sweep account.

      Guesstimated annualized total return = 0.070 x $24.29 * x 1.035 / $31.45 + 0.035 = 0.090 = 9.0%

    • It's ironic that you posted this today. I was looking at KFT last couple of days. I read the AR, and looked at the financials.

      Weak ROE, average free cash flow. Two things WEB looks for are strong ROE and FCF, so I don't get why he was all over it.

      Maybe he knows something or he was just looking for a safe place to park $4B.

    • Wow, I must have been reading WEB's mind.

    • KFT is an increasing company.

      The possible problems are

      1. weakness of brand(s)
      2. cashing being sucked out by MO in the form of dividend that are larger than they should be.

      I dont think either one is to much of a risk. Mo might be a better buy since each share of MO is about 1 share of KFT, the cig biz, and SABMiller holdings.

      KFT by itself would be a better buy around 25$ or lower according to my notes yet I dont really know why I picked that value. It does tell me i thought it was worth around $32 a share.

      It was IPO at 31 i think about 2 years ago. MO is very shareholder friendly so you can bet that they thought 31 a share was a good deal for them 125% of IV?
      That would make 31 about IV now.

      SWUSC

 
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