Best Stock to Buy Right Now: Altria vs. Kraft Heinz

Motley Fool12-06

Altria owns the most important cigarette brand in North America, but cigarette sales are falling. Kraft Heinz brought together two food icons with the goal of cost-cutting, but it has had to ...

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that's just how the business world works. The rough patches, meanwhile, can provide long-term investors with good buying opportunities. However, you need to tread carefully so you don't end up buying a company that looks like it could go the way of the buggy whip. A comparison between Altria  and Kraft Heinz  will help explain the tightrope that turnaround investors have to walk.What does Altria do?Altria is one of the largest tobacco companies in the world. It mostly sells cigarettes and has a focus on the U.S. market . Given the addictive nature of tobacco, Altria's customers tend to be very loyal. And it owns the Marlboro brand, which has a huge 42% or so market share in the United States. Overall, Altria's market share is nearly 46%. It is a giant in the cigarette business.Image source: Getty Images.What does Kraft Heinz d","collect":0,"end_time":0,"defaultTopTitle":"fool.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0868494617.USD":"UBS (LUX) EQUITY SICAV - US TOTAL YIELD SUSTAINABLE \"P\" (USD) ACC","IE000M9KFDE8.USD":"NEUBERGER BERMAN US LARGE CAP VALUE \"A\" (USD) ACC","SG9999015358.SGD":"United Income Focus Trust Dis SGD-H","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","LU1228905540.USD":"NINETY ONE GSF GLOBAL QUALITY DIVIDEND GROWTH \"A\" (USD) INC 2","LU2552382215.SGD":"WELLINGTON US BRAND POWER \"A\" (SGDHDG) ACC","BK4075":"烟草","LU0323591593.USD":"SCHRODER ISF QEP GLOBAL QUALITY \"A\" (USD) ACC","LU2404859667.USD":"FUNDSMITH EQUITY FUND \"R\" (USD) ACC","LU0690374961.EUR":"FUNDSMITH EQUITY \"R\" (EUR) INC","LU2552382058.USD":"WELLINGTON US BRAND POWER \"A\" (USD) ACC","BK4550":"红杉资本持仓","SG9999001440.SGD":"United Global Dividend Equity Fund A SGD Dist","KHC":"卡夫亨氏","LU2552382132.HKD":"WELLINGTON US BRAND POWER \"A\" (HKD) ACC","LU1571399168.USD":"ALLSPRING GLOBAL LONG/SHORT EQUITY \"IP\" (USD) ACC","LU2242652126.USD":"FIDELITY FUNDS GLOBAL DIVIDENDS PLUS \"A\" (USD) INC","IE00BLSP4239.USD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis USD Plus","LU1929549753.HKD":"FRANKLIN INCOME \"A\" (HKD) INC","LU0545562505.USD":"NINETY ONE GSF GLOBAL QUALITY DIVIDEND GROWTH \"A\" (USD) INC","LU0162691827.USD":"BGF US BASIC VALUE \"A4\" INC","LU1121112475.USD":"NINETY ONE GSF GLOBAL FRANCHISE \"A\" (USDHDG) ACC","SG9999014575.USD":"UOB UNITED INCOME FOCUS TRUST FUND (USDHDG) INC","PM":"菲利普莫里斯","LU0094547139.USD":"abrdn SICAV I - GLOBAL SUSTAINABLE EQUITY FUND \"A\" (USD) ACC","LU1066051811.HKD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AM2\" (HKD) INC","BK4566":"资本集团","GRO":"Brazil Potash Corp.","LU0208291251.USD":"FRANKLIN MUTUAL U.S. VALUE \"A\" (USD) INC","GB00B4QBRK32.GBP":"FUNDSMITH EQUITY \"R\" (GBP) INC","LU1162221912.USD":"FRANKLIN INCOME \"A\" (USD) ACC","MO":"奥驰亚","LU0237698245.USD":"富达环球地产基金A","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","GB00B4LPDJ14.GBP":"FUNDSMITH EQUITY \"R\" (GBP) ACC","SG9999011175.SGD":"Nikko AM Global Dividend Equity Dis SGD-H","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","PG":"宝洁","LU1914381329.SGD":"Allianz Best Styles Global Equity Cl ET Acc H2-SGD","BK4212":"包装食品与肉类","SG9999002232.USD":"Allianz Global High Payout USD","LU0234572021.USD":"高盛美国核心股票组合Acc","SG9999014542.SGD":"United Income Focus Trust Acc SGD","SG9999002224.SGD":"Allianz Global High Payout SGD","BK4018":"居家用品","LU0320765489.SGD":"FTIF - Franklin Mutual US Value A Acc SGD","LU1868836757.USD":"CT (LUX) I AMERICAN FUND \"2\" (USD) ACC","LU0689626769.HKD":"AB SICAV I - SUSTAINABLE US THEMATIC PORTFOLIO \"A\" (HKD) ACC","LU1228905037.USD":"NINETY ONE GSF GLOBAL QUALITY DIVIDEND GROWTH \"A\" (USD) ACC","LU1066053197.SGD":"HSBC GIF GLOBAL EQUITY VOLATILITY FOCUSED \"AM3\" (SGDHDG) INC"},"translate_title":"目前最值得购买的股票：奥驰亚与卡夫亨氏","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"GRO":1,"PM":1,"PG":1,"MO":1,"KHC":1},"content_text":"Altria owns the most important cigarette brand in North America, but cigarette sales are falling.\n\n\n\n\n\n\n\nKraft Heinz brought together two food icons with the goal of cost-cutting, but it has had to change gears strategically.\n\n\n\n\n\n\n\nIf you have to pick between Altria and Kraft Heinz, the one with the less-troubled business is the way to go.\n\nEvery single company eventually goes through a difficult period; that's just how the business world works. The rough patches, meanwhile, can provide long-term investors with good buying opportunities. However, you need to tread carefully so you don't end up buying a company that looks like it could go the way of the buggy whip. A comparison between Altria (MO 0.81%) and Kraft Heinz (KHC -0.29%) will help explain the tightrope that turnaround investors have to walk.What does Altria do?Altria is one of the largest tobacco companies in the world. It mostly sells cigarettes and has a focus on the U.S. market (it spun off its foreign operations into Philip Morris International (NYSE: PM) several years ago). Given the addictive nature of tobacco, Altria's customers tend to be very loyal. And it owns the Marlboro brand, which has a huge 42% or so market share in the United States. Overall, Altria's market share is nearly 46%. It is a giant in the cigarette business.Image source: Getty Images.What does Kraft Heinz do?Kraft Heinz is one of the largest packaged food companies in the world. It was created via the merger of Kraft and Heinz, two of the most storied names in the food industry. Although it doesn't have a single dominant brand like Altria, you probably know many of the company's products, which include the obvious, like Kraft and Heinz, but also Philadelphia Cream Cheese, Lunchables, Kool-Aid, and Jell-O, among many others. The company's collection of brands, distribution system, and marketing abilities make it a valuable partner to retailers around the world.There are big problemsWhile both Altria and Kraft Heinz are facing business headwinds, the issue Altria is dealing with is particularly troubling. Cigarette demand has been falling for years in the United States because of a societal shift away from smoking, as the habit has been clearly identified as a health hazard. To put some numbers on that, Altria sold 10.6% fewer cigarettes in the first nine months of 2024 than it did in the same span of 2023. In 2023, it sold 9.9% less smokes than it did in 2022. The downtrend has been going on for years.Altria has been able to raise prices to offset the ongoing declines, thus allowing it to support its huge 7% dividend yield. This fact has kept investors interested in the stock, but it simply covers over the big problem: Altria's primary business (tobacco products, which account for nearly 90% of revenue) appears to be in secular decline.The problem facing Kraft Heinz is a little bit different. The two companies merged with the idea of generating value by cutting costs. That didn't work out as well as hoped since it is very hard for a company to cut its way to growth. It is now working on a different plan, which includes culling out laggard products while focusing more on its most important ones. This is the same approach that has been successfully used by a number of other consumer staples companies in recent years, including Procter & Gamble (NYSE: PG).That's not a guarantee that it will work for Kraft Heinz, noting that the company has posted weak results in the areas where it has supposedly been focusing its efforts. That weak execution, however, is why its dividend yield is 5% today compared to around 2.6% for the average consumer staples company. Given the company's brands, size, and distribution system, it seems like it will probably muddle through the transition it is working on, even if it is a bumpy ride.How big a problem are you willing to take on?Here's the question: Is roughly 2 percentage points of yield worth the risk of owning a company that is facing a secular decline in its most important business? That would be exactly the decision you would be making if you bought Altria over Kraft Heinz. Buying Kraft Heinz would mean buying a diversified food maker working on turning around a stable of iconic brands using the same approach that has worked successfully for other consumer staples companies. And since the yield is a lofty 5%, it isn't like you aren't getting paid very well to wait for Kraft Heinz to muddle through this business transition.But remember, there's one key difference -- food isn't in a secular decline. If anything, food demand is likely to grow along with the world's population. So, Kraft Heinz's business is on a fundamentally stronger footing than Altria's. From a risk/reward perspective, Kraft Heinz's lower yield seems like the better choice for most investors.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2489440058"}