It’s fundamentally strong enough to hold onto. Why? 1) It’s forward P/E is cheap, which means its stock price and overall market cap are undervalued. So, in time, you should see the market cap come up much more, relative to the debt. 2) The debt is a long-term problem if not fixed but right now, it doesn’t affect their ability to operate. They’ve been around since 1869. 3) Their entire debt could be fully paid off with 4-5 years worth of earnings.
If we were holding it 10-20 years, KHC’s debt would bug me more than the average 2-4 year holding time we’re typically in one.
Keep in mind, when we originally started investing in it, it was at a much higher stock price, thus much higher market cap. So it’s market cap to debt ratio was more favorable. However, once KHC goes into its long-term wave 3 on its weekly chart, you’ll see that market cap blossom back out further, which further improves that ratio.
Leslie, thanks for chiming in and helping out too.