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holy smokers and this ain't no joker craft hindes Corporation is down over 27% today and this is shocking for two reasons one this is one of Warren Buffett's main Investments and the fact that one of Warren Buffett's main Investments would be down 27% on a day is shocking second craft hindes is a massive food conglomerate this is like a type of move you'd expecting like some speculative like Tech stock or something like that A Down 27% move okay first I want to read you through kind of the story here and then I want to give my opinion on this and I have a lot of opinions on this okay Warren Buffett's birkshire haway lost more than $4 billion in a single day after shares of craft hindes one of the Investor's largest Holdings plunged on a slew of bad news including a dividend cut and a government investigation stock of the package food giant whose products include hindes tomato ketchup Jello craft macaroni and cheese plunged more than 28% on Friday and for Burkshire which owned around 325 million shares at the end of 2018 the losses are steep at current levels birkar haway is down $4.4 billion on paper as a Friday session alone craf is Burkshire six largest Holdings behind Apple a few Banks and Coca-Cola this chart will show you here that basically craft hindes is one of their biggest Investments out there and it just has gotten absolutely obliterated so as far as the numbers go craft hindes reported earnings of of 84 cents a share in the fourth quarter thanks to a rate down of assets down 6.7% from a year ago it posted fourth quarter revenues of 6.89 billion both metrics fell short of analyst expectations the company also said the SEC issued the company a subpoena in October as part of an investigation into the procurement of accounting policies okay holy smokus that's a little scary right there that's the scariest thing of all this okay craft H said it launched an internal investigation into the matter after receiving the subpoena following the investigation craft hin said it posted $25 million increase to the cost of product sold after determining it it was inmaterial to the fourth quarter of 2018 and previously reported 2018 and 2017 in term on a year in date period so first off I have a lot of opinions on this whole situation this massive stock crash for craft Hines okay the first one being obviously Warren Buffett's one of the most most respected investors of all time okay on the mountain Rushmore of great investors Warren Buffett's going to be right there he is right there he's probably the best ever okay but the fact is everyone takes L's in this game and you have to accept that all right so unrealistic to expect that you're going to invest for decades and decades and decades and not have a few big mistakes here and there or minor mistakes here and there everyone makes mistakes and investing some sometimes people might laugh at somebody that makes a mistake in an investment or something I'm just going to tell you like every everyone who invests money will make a mistake everybody who's in business in general every once in a while if you're doing this for decades and decades you're going to make mistakes it's just what happens the key is to win a lot more than you take L's all right Warren Buffett at the end of the day has already won the Super Bowl a million times all right and the fact that he loses one Super Bowl doesn't necessarily take away from his greatness it just shows you that you've got to understand sometimes you're going to take L's in this game it's just the way it goes and you have to accept that as a stock market inv or someone in business in general you just have to accept that that that is a fact because you will take L's in this game and also you have to get over it mentally like if you make a mistake like get over it okay because it's something you shouldn't hold yourself back for oh I made a mistake I can't invest blah blah blah I stink at investing or something like that because you made a mistake like just get over it man get over it move on in the next one learn what happened in that last one and move on okay next thing I want to point out here so hindes craft they own a ton of Brands okay a massive Goliath Company like you could look at their brands there they own you know just about anything you could possibly think of Maxwell House and planners and Philadelphia Cream Cheese Oscar Meyer A1 I mean obviously craft cheeses Colo and pickles I mean look at the amount of Brands they own obviously Hines ketchup and all those type of Brands right now there's a very scary chart I'm about to show you okay this chart is one of the reasons in my opinion one of the sole reasons why craft hindes has starting to fall off in a major major way okay this is one of the reasons look at this chart here this shows Craft hindes Company advertising spending in the United States from 2014 to 2017 we don't have the 2018 numbers in yet um but they could be down once again year-over-year but look at this in 2014 this was a company spending over $600 million on advertising in the United States and you go up to 2017 and that number has fallen by over $150 million over $160 million they have cut back on Advertising okay let's think about that from perspective you're talking about all these Legacy brands that have always had a ton of advertising spend behind them which has helped make them the most popular products in food stores across all the United States right and all of a sudden you say well you know what let's start cutting back each and every year on our advertising spending and what ends up happening is as the years go on you keep decreasing the advertising spending your Brands become a little less significant as they were in the prior years and it does help out profitability in the short term because you're spending Less on advertising guess what that money can just go back down to net income but your Brands get a little less relevant each and every year when you've got brands that were built on the backs of advertising for decades and decades to I remember being a little kid my mom would be watching soap opers and when the commercials came on guess what you know a ton of th that company's products were always shown on the commercials my mom was watching those soap opers on the TV right and then guess what when we went to the food store we ended up buying a lot of those Brands that's just the way it was right and so all a sudden you start cutting back your advertising in and then your brand gets a little less uh relevant by the day okay also the Lion Share of the advertising spend for craft timeses is still spent on traditional media okay television newspapers Billboards and these type of things Direct Mail these are the things that made craft hindes into this Goliath Company that could buy other brands and had all this money and just spit out money and dividends and blah blah blah right all that traditional advertising is what made them but the issue is we're in a different landscape where traditional advertising the spend just doesn't go nearly as far as it did 20 or 30 years ago first off and second the spend you could do on other things the new platforms you can get so much more bang for your buck okay where should craft hindes really be advertising they should be advertising on YouTube guess where people as attention actually is YouTube they should be spending Mass amounts of money on Facebook guess where people spend a lot of time Facebook they should be spending massive amounts of advertising spend on Instagram Instagram has the worlds of attention and especially United States citizens okay craft times has to ask themselves one very specific question and this question answer is the answer to all their problems okay where are the 20 to 45 year olds these are the people who end up buying your products in Mass why because 20 to 45 year olds are the ones that have kids okay and the ones that have kids and have a family in general they're the ones that are always going to spend the most amount of money on grocery shopping right because if you have a family of four or you have a family of five you have a family of six or or whatever you have all these kids you have a spouse to take care of you're going to always be the one that spends the most money possible Grocers are always trying to Target those people that are in that 20 to 45y old age bracket okay and if you're not in front of their faces because you're spending still all your money on traditional advertising where the 20 and 45 year olds aren't guess what your advertising spend is not going nearly as far you need to be spending money on Facebook Instagram YouTube where people actually are and craft Hinds is still spending massive amounts of money on traditional media when when traditional media is dead the people that still watch traditional media are the people that are maybe in their 50s and 60s and 7s and 80s but guess what those folks their kids have already grown up okay and those folks already are the ones that buy your product you got to focus on the next Generations because they're the ones that are going to dictate whether your business thrives or whether your business becomes less and less relevant over time and one last thing I want to point out here I'm surprised Warren Buffett bought this stock in the first place not just because of all the other issues but here's the main part okay craft Hines has an absolutely awful balance sheet this is one of the worst balance sheets you could possibly find okay craft Hines company has about $13 billion just sitting around in cash okay they have no short-term Investments they have no long-term Investments but we go ahead and look down at their long-term debt and this is a company that has nearly $31 billion in long-term debt 31 billion so they got 1.3 billion in cash and they got 31 billion in long-term debt that is awful okay that's an awful ratio that's one of the worst I've seen in quite a while especially for a bigger type company that's horrible all right so I'm very surprised with all these issues Warren Buffett ended up buying the stock in the first place and uh you know now they're down over $4 billion who knows maybe someday they'll be able to eat out a profit but as of right now it's not looking good and if you're a new investor kind of looking into that stock and you're looking into a company you're like dang they got $31 billion in long-term in debt imagine the interest payments they going to have to make on all that debt over time do I really want to buy something like that when I looked into it I'm like I wouldn't touch it just for the balance sheet alone never mind the issues with still spending way too much on traditional media never mind the fact that they've been cutting back advertising spending and all those bad things right you just look at that balance sheet it's like why would I want to buy a company has $31 billion in long-term debt like that mind-blowing guys anyways I want to know your opinion down there in that comment section as always thank you for watching and have a great day
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