We got stopped out of KHC. If you purchased from my recommendation and have been following, we got stopped out today. Please sell. We will book a loss of about 21%.
When I wrote about Hienz I imaged there may be some a bit more bad news on the horizon, but I believed the bad news was mostly priced into the stock. Things were looking good initially on our timing.
If you hadn’t heard the news, $KHC is writing of $15 billion of assets on their balance sheet and is cutting their dividend.
They stated in regards to the dividend cut “For balance sheet flexibility”. You know it’s bad for a company when they start sounding like the Federal Reserve.
When we bought the payout ratio was low, but I was not anticipating such a large write down of their assets.
In addition there is even a SEC probe into their accounting. No doubt the lawyers will be circling. We may even see a class action lawsuit for shareholders.
The 21% is not devastating to us, especially if you have used proper position sizing. But if it makes you feel any better Warren Buffet lost more than $4 billion dollars in a single day on $KHC.
Hopefully Warren shows up at corporate to crack some heads.
Action: Sell KHC for a loss of 21%.
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