Time for investors to catch up with Heinz’s diverse portfolio

If you think H.J. Heinz (NYSE: HNZ) is just about ketchup, you need to catch up with the times. The company has plans over the next two years to offer 400 new products and inject roughly $100 million into a marketing plan to keep business growing.

Heinz produces more than 650 million bottles and 11 billion packets of ketchup annually. But it also oversees a diverse portfolio of brands such as Weight Watchers, Smart Ones, Bagel-Bites and Ore-Ida potatoes. It plans to build upon its core portfolio, particularly in the health and wellness segment, which it sees growing twice as fast as all packaged goods.

For the fourth quarter, Heinz saw overall sales rise 11.3 percent to $2.7 billion, and profits increase 7.2 percent from last year. Results, however, weren’t even.

International sales, which make up 56 percent of Heinz’s revenue, benefited from strong surges in demand. But U.S. food service revenues were essentially flat, while U.S. consumer product sales rose 10 percent. Heinz increased its dividend 9 percent to $0.415 per share.

At around $50 per share, Heinz stock is at its highest levels in nearly a decade. Yet, when compared to some peers, it still looks attractively priced. Moreover, it’s producing prodigious amounts of cash flow. It seems Heinz does indeed have more than 57 varieties of investor surprises.

Ask the Fool

Q: What’s a company’s book value? – W.M., LaCrosse, Wis.

A: Book value is an accounting concept, reflecting a company’s value according to its balance sheet. To get it, you start with the total assets and then subtract intangible assets (such as goodwill, patents and trademarks) and total liabilities.

Book value used to approximate a company’s intrinsic value, as most assets, such as factories and land, were capital-intensive and appeared on the balance sheet. But as America’s economy is becoming more service-oriented, book value has become less relevant for investors. Consider Microsoft. Its book value was recently about $26 billion, far from its market value north of $260 billion. Much of Microsoft’s value stems from assets and competitive advantages that don’t register significantly on the balance sheet: intellectual property, employees, a strong brand and market share.

As another example, imagine a firm that owns a lot of land and many buildings. Over the years, the value of buildings on the balance sheet is depreciated, eventually to zero. But these assets are rarely worthless and can even appreciate in value over time. Such a company might actually be worth much more than its book value.

With many companies, you’d do well to largely ignore book value.

Q: To buy a company’s stock, do I have to work for it? – T.R., Jackson, Mich.

A: Not at all. (Although some companies do offer employees stock options, stock grants or the chance to buy shares of company stock at a discount.) All you generally need is a brokerage account. You can learn how to pick a brokerage at www.broker.fool.com. Most major companies, and many smaller ones, are publicly traded. Examples: ExxonMobil, McDonald’s, Ford, Nike, IBM.

My dumbest investment

I’ve been trading stocks for about three years now and have finally come to the conclusion that trading for quick profits is not the way to make big money in the long run. I’ve also made a lot of blunders, such as with Apple. I bought the stock in 2005 for about $37 per share and sold at $51, for a 38 percent gain. The shares were recently trading around $180! – Bill, online

The Fool Responds: At least you made money on this mistake – many beginners aren’t so fortunate. By hanging on, you’d have nearly quintupled your original investment. As long as a company is healthy, has sustainable competitive advantages and is growing at a good clip, it’s often best to hang on. Those who’ve made fortunes in various stocks have typically done so by holding on for years, if not decades. Still, you shouldn’t hang on if you don’t have confidence in the company or if it’s trading well above what you estimate the shares are worth. In such cases, you might make more money elsewhere.