In late August, I wrote an article about a potential short opportunity in Kraft Heinz (KHC). Over that period of time, the short position is a little more than $6 in the money. This follow-up article is to reiterate the current short thesis for KHC, and give potential investment ideas of how to maintain short exposure. KHC’s price action continues to trend lower, with little sign of letting up. Fundamentally, the company remains under pressure, with flat revenue growth, amid potentially contracting operating margins. Finally, using option strategies, you may be able to get short exposure with limited risk.
Price Action
In the previous article, KHC was rolling over, below its 200-day moving average, but had yet to break key support below $80. Over the span of a few months however, support has been broken, and selling pressure continues on the stock. A number of analyst downgrades have been the catalyst for intensifying selling pressure. The list of firms that downgraded KHC are as follows: Morgan Stanley, Goldman Sachs, Susquehanna.
