In an overheated market, you really have to be creative in looking for value. You really do. The old rules no longer apply. As you probably already know, thanks to all the stimulus spending that the US Federal Reserve engaged in, there is just so much cheap liquidity flowing in the market. All this cheap money has exploded the price of solid companies and made even dubious companies very expensive.
In this climate, it makes all the sense in the world to buy otherwise solid companies that are having a tough news cycle. While this might not necessarily apply to Lumber Liquidators, this definitely applies to Kraft Foods (NASDAQ:KRFT). Unless you haven’t been paying attention to the news, Kraft Foods, the maker of the famous Kraft macaroni and cheese dinner packets, got into a bit of a public relations storm. It was found out that some of the boxes of macaroni and cheese that it shipped out to countries in South America, the Caribbean, Puerto Rico, and the United States contained pieces of metal.
Since biting through a hard piece of metal while you are enjoying your mac and cheese dinner is probably going to ruin your night, it is no surprise that the stock of this company fell. Kraft Foods has issued a voluntary recall of 242,000 cases of its macaroni and cheese product. Keep in mind that these are cases. We are not talking about boxes. In a case, there are usually 24 boxes. This should give you an indication of how big the recall is.
It is going to be interesting how this all plays out. So far, Kraft’s stock has been depressed by 1.91%. As a value investor, I am hoping that it drops even more as we hear more details regarding this piece of bad news. You have to remember that stock traders are always looking for an excuse to cash out their paper profits. There would be some downward pressure on the stock. That would be the best time to pick up this otherwise solid company.