Berkshire Hathaway's Heinz Deal Fails to Inspire Wall Street


Talk about a day with big news and little movement. It seems that has become the norm on Wall Street recently. Berkshire Hathaway's $28 billion deal to buy H.J. Heinz has not much inspired investors to bid up stocks: As of 3:25 p.m. EST, the Dow Jones Industrial Average is up a single point, while the S&P 500 is up 0.15%.

Berkshire Hathaway will pay $72.50 per share for Heinz, or $23 billion for the company's equity, while assuming $5 billion in debt. In a fairly unusual move for Warren Buffett, he will own more than half of the company while investment firm 3G Capital will be in charge of operations. If you want a peek into Buffett's strategy, look no further than the brands he has acquired over the years. GEICO insurance, Benjamin Moore paint, Fruit of the Loom, Dairy Queen, BNSF Railway, and large stakes in Coca-Cola and Heinz have been folded into the Berkshire empire. Big brands are one of the great competitive moats for companies, and that is clearly one of the qualities Buffett looks for in his investments.

Speaking of Buffett and big brands, Coca-Cola once again ranks among the Dow's biggest losers, 1.1% near the end of today's trading session. This is the third straight day the company has been among the Dow's biggest losers after reporting earnings, but today Pepsi's strong earnings stung the stock. Pepsi's profit rose 17% in the fourth quarter, driven by higher prices, and the company announced a $10 billion share buyback. Following a disappointing report from Coke early in the week, this is salt in the wound for Coke's investors. In the long term, this doesn't mean Coca-Cola is doomed, but Pepsi's stock may be the hotter commodity of the two right now.

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Fool contributor Travis Hoium has no position in any stocks mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw. The Motley Fool recommends Coca-Cola and H.J. Heinz Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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