While there may not have quite been 57 varieties of disaster as far as 3G and Warren Buffett’s experience with Kraft Heinz, the actual number may not be that far off. Clearly, schadenfreude plays a part for some observers of this situation. But perhaps the key issue here is how is this situation going to play out?
The answer may be that given the way that fundamental investors simply regard a cheaper share price as offering more value than an expensive one, doubling down here at $30 (or lower) may take away the pain of having overpaid by a significant amount. Given the shadow of the SEC, and the possibility of even more write downs, this situation appears fluid to put it politely. The final issue for Buffett / 3G is that Kraft Heinz’s woes are so substantial, being “back seat driver” shareholders may simply not be enough to stem the spiral of decline.
But in one way, it is not the fundamental position currently which is of most interest. The daily chart showed what appeared to be a gap down overshoot move below $30 in May, and then gapped back up in June. This set up is called an Island Reversal and is ironically one of the strongest technical formations. A break of the February resistance line at $31.50 would back the idea that a technical rally is on its way. But at least while Kraft Heinz remains above the June $28.95 gap floor, we can regard this stock as an unlikely recovery situation for a move back towards the 200 day moving average now near $40 on a 3-4 months timeframe.