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Stocks B / Berkshire Hathaway


Subject:  Re: Berkshire buys Heinz Date:  2/14/2013  4:32 PM
Author:  mungofitch Number:  198604 of 236901

The problem is that Heinz is not a growth company.

It's certainly not a high growth company.
Almost any metric (book/share, earnings/share, cash flow/share, dividends/share, sales/share)
Heinz has been growing at around 5.0%/year to 7.5%/year in the last 5-7 years.
Bearing in mind that we had a global financial crisis, that's not too bad.
More than inflation, but not by a whole lot.

The issue is to what extent a small amount of relatively predictable
growth above inflation is worth more than unpredictable growth at whatever rate.
At a 3 year time horizon, nothing extra.
At a 30 year horizon, maybe something extra. Maybe.

Evaluate this deal as you would a bond investment.
$8bn preferred shares as perpetual nominal 9% plus $4.5bn equity at 5% plus inflation plus modest growth.
Home run? No. But a guy could do worse.

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