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Kraft Shares Tumble as Buffett Partner 3G Capital Cuts Stake

Shares of Kraft Heinz Co. (KHC) dropped 4.09% this week since 3G Capital, Warren Buffett (Trades, Portfolio)'s partner in creating the company, disclosed on Monday that it sold about 10% of its stake.


3G Capital, Kraft-Heinz's second-largest shareholder, sold 25,068,657 shares of the company, reducing its stake to 245,028,716 shares. Its sell price was $28.44 per share, far below where the newly merged company began trading in 2015, around $77. Kraft Heinz closed at $28.41 per share Wednesday after gaining 0.18% for the day.

Also on Monday, 3G Capital's founder Jorge Lemann disclosed purchasing 3,496,503 shares of Kraft Heinz. The move increased his personal holdings to 3,516,449 from 19,946.

Kraft's stock plunged to all-time lows around $25 in August when it released delayed first-half financial results that featured lower sales and about $1.22 billion in write-downs. In addition to a 4.8% year-over-year decline in net sales, the company's net income sank 51.4% to $854 million, or 70 cents per diluted share. Kraft has been fighting changing consumer tastes and trends away from its iconic brands, such as Jell-O, CapriSun and Kool-Aid. Days later, the company announced that it would eliminate 400 jobs.

Other trouble emerged earlier in the year, when the company cut its dividend, disclosed an SEC investigation into its accounting and warned that it would write down the value of brands such as Kraft and Oscar Mayer by $15.4 billion.

Buffett joined Brazil's 3G Capital to create Kraft Heinz, the third-largest food and beverage company in North America, by merging H.J. Heinz and Kraft Foods in 2015. His $10.1 billion stake in the company is his sixth-largest public equity holding, below mega holdings such as American Express (NYSE:AXP) and Apple (NASDAQ:AAPL). Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is the largest shareholder of Kraft Heinz, with 325,634,818 shares, representing 26.69% of the company.

At his shareholder meeting in May, Buffett said that he "paid too much" for Kraft Heinz, although he maintained a good relationship with partner 3G Capital.

"You can turn any investment into a bad deal by paying too much," Buffett told shareholders in reference to Kraft.

Other prominent investors in Kraft Heinz trimmed their stakes in the second quarter, including Mario Gabelli (Trades, Portfolio), who sold 81.24% of his position. Lee Ainslie (Trades, Portfolio)'s Maverick Capital started a small position worth only 0.05% of his equity portfolio, and Joel Greenblatt (Trades, Portfolio) increased his holdings 68.71% to 0.55% of his equity portfolio.

Buffett told CNBC in 2015 that he intended to invest in Kraft "forever" and has not sold any shares.
This article first appeared on GuruFocus.