Kraft Heinz (KHC) has a long and storied history, enhanced by a merger 10 years ago between Kraft and Heinz. Chances are if you grew up in the U.S., you are more than familiar with Kraft Mac & Cheese, Philadelphia Cream Cheese, Oscar Meyer hotdogs, or even Lunchables. Not to mention the ketchup and pickles.

But as the title here says, KHC actually did cut the cheese… out of part of its business. The company announced earlier this week that it is splitting back into two companies. Yet, this is not as simple as reversing the 2015 combination. Kraft Heinz is now a powerhouse in the food industry that generates $25 billion in revenue, dominating supermarket shelves as much as ever. 

The two separated businesses will be named Global Taste Elevation Co. and North American Grocery Co. 

The former will get the ketchup, mac & cheese, cream cheese, and a range of sauces and seasonings, a $15 billion separate business, and soon, a separate ticker symbol. These are considered the more growthy product lines. That’s a relative term, since earnings growth has been tough to come by in KHC’s current form. And if there’s one thing this stock market needs to lift prices, it’s growth. 

The latter will be led by hot dogs, Kraft “singles” cheese slices, Lunchables, and to wash it down, Maxwell House coffee. These are the more stable brands, accounting for a $10 billion piece of the pie. I’d assume this is where most of KHC’s stout 5.94% dividend yield will end up. 

What does all of this mean for the stock, which will soon be two separate trading companies? Heck if Wall Street knows just yet. This separation of business lines has been rumored and even encouraged for a while. But it won’t take effect for nearly a year. 

Ah, but the charts might offer a clue. So let’s walk down that aisle and check them out. 

Starting with the daily chart, the stock’s immediate dip on the announcement was followed by a Wednesday bounce. But the chart is still quite weak. The one bright spot is a looming date with that support level around $25-$26 a share. Not too far south of here. 

The weekly view below prompted me to stretch back beyond the typical 4 years I look at and present to you. I went back to the start of 2020, the year of the pandemic. We can see that KHC, apart from that nice dividend, has had no share price growth since that year.

KHC Faces Off Against MAHA Movement and Is Winning for Now 

Finally, the monthly chart is well worth a look in this case. Because I think it lends credence to that classic investment cry of “people are not going to stop buying cheese, hot dogs and coffee!” OK, that’s not the same as water and electricity, and KHC is hardly a utility. 

But no matter how much the U.S. government’s “Make America Healthy Again” (“MAHA”) movement penetrates the broader population, the country is not likely to go all-in on organic this or that any time soon. So yes, this looks like a consumer staples stock as far as I can see.

That’s where the bullish case could be. The stock price is more than 40% off its first day of post-merger trading back in 2015. And, KHC trades 70% off its 2017 high. Even including the dividends, the stock is down about 43% over the past 10 years, a period in which the S&P 500 Index ($SPX) has quadrupled in value. I believe the technical term for that type of laggard performance is “yikes.”

How to Trade KHC Stock Here 

KHC started with a single product. It was in 1869, and it was horseradish. Henry J. Heinz took his mother’s recipe. And that started an iconic American brand, which has now become a not-so-hot dog of a stock. 

What happens from here is too opaque to do more than guesstimate. And with a stock like this, down so far but with a real business behind it, the option part of my brain skips the typical collar strategy and goes right to buying call options. Or as options players know them, “LEAP” calls. That’s a plain old call option, but with a very long time until expiration.

How long? Let’s look at the longest one I could find, expiring on Jan. 15, 2027, more than 16 months from now. The goal here is to essentially set it and forget it unless or until the stock really spikes. There’s a long time for that to happen.

KHC’s volatility is a big part of my motivation here. See that “Historic Volatility” level of around 30%? That means that in the past 12 months, KHC’s volatility level has been higher than its current 26 level 70% of the time. That means buying options is not very expensive, despite the recent stock price decline.

If I decided I wanted to profit on the stock above the $30 level, $1 above where it traded as recently as July 30 of this year, it would cost me $1.83 a share. That’s a long way up from where it trades, since I’d need the stock to get not only to $30, but also above the call option cost. 

So I would not be profitable at expiration until KHC rose above $31.83. But if the recovery story is embraced by the market, there’s some upside here for a relatively small cost. And with that early 2027 expiration date, that’s about 6-7 months post breakout into the two stocks from the one KHC.

This is evidence that regardless of how you slice it, this popular set of more than 50 food product lines can be approached in many different ways. The stock may wiggle around like its Jell-O brand for a while. But for those who want to take a shot, while also being patient to let this one play out, there are options.