Buffett's Berkshire Hathaway has lost $5 billion this year on Kraft Heinz's downturn

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Warren Buffett

Gerard Miller | CNBC

Warren Buffet’s Berkshire Hathaway has lost more than $5 billion this year on its investment in Kraft Heinz as the packaged food company’s stock has continued to tumble.

Shares of Kraft Heinz hit a record low on Thursday, falling more than 13%, after the company announced an additional writedown of $1.22 billion and missed revenue expectations.

Kraft earned 37 cents per share, or 78 cents per share excluding the writedown, and generated $6.406 billion in revenue during its fiscal second quarter. Analysts expected earnings of 75 cents per share and $6.580 billion in revenue, according to Refinitiv.

Berkshire Hathaway owns more than 325 million shares of Kraft Heinz, representing 26.7% of the company. The value of the position has declined to about $8.7 billion from just over $14 billion since the start of the year, creating a roughly 37% loss for Berkshire Hathaway.

Kraft Heinz was the sixth-largest holding in Berkshire’s portfolio as of the end of 2018. Berkshire Hathaway and 3G Capital bought Heinz in 2013 for $23 billion and merged the company with Kraft two years later.

“I made a mistake in the Kraft purchase in terms of paying too much, ” Buffett told CNBC in June.

Buffett’s lauded investing career has been built on a strategy of investing in well-known brands at attractive valuations. Berkshire also has large investments in Apple, Coca-Cola and several major financial firms.

The food company’s latest announcement comes after it implemented a $15.4 billion write-down of its Kraft and Oscar Meyer brands, a dividend cut and revealed the existence of a Securities and Exchange Commission investigation earlier in the year.

Kraft Heinz’s stock plunged 27% following that announcement, handing Berkshire Hathaway an on-paper loss of $4.3 billion in a single day of trading.

In June, Buffett denied reports of tension between him and the leadership of 3G Capital. Shares of Berkshire Hathaway rose slightly on Thursday despite Kraft Heinz’s drop.

Berkshire Hathaway reported earnings last Saturday, showing an 11% decline in operating profit in the second quarter from a year before. The company reported operating profit of $3,757 per Class A share, while analysts had expected $3,851.28 per share, according to Refinitiv.

—CNBC’s Tom Franck contributed to this story.

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