Few, if any, money managers command such attention on Wall Street Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett. Since ascending to the role of Berkshire’s chief in the mid-1960s, the aptly named “Oracle of Omaha” has overseen a scorching hot cumulative return on his company’s Class A shares (BRK.A) of nearly 5,700,000% .
Nearly doubling the benchmark’s total annualized return S&P500 spanning six decades is sure to catch the attention of a money manager. Some investors have even made a habit of mirroring Buffett’s trades to reap substantial long-term profits.
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Warren Buffett, CEO of Berkshire Hathaway. Image source: The Motley Fool.
The way investors can track Buffett’s trading activities is through Berkshire’s quarterly 13F filing, which was filed on November 14. A 13F gives investors a quick snapshot of what stocks Wall Street’s smartest money managers bought and sold in the last quarter (in this case, the quarter ending in September). While 13Fs aren’t perfect—since they’re filed up to 45 days after a quarter’s end, the data can be out of date for active hedge funds—they can nevertheless point investors to the stocks and trends that are capturing the interest of Wall Street’s top money managers . .
Although Warren Buffett has been a net seller of stocks for eight quarters in a row, the arguable highlight of Berkshire’s third-quarter 13F is the beloved consumer brand he’s suddenly diving into.
By mid-2024, there was no doubt which stock the Oracle of Omaha preferred most: stock of his own company.
Before July 2018, Buffett and his right-hand man Charlie Munger, who sadly passed away in November 2023, had their hands tied when it came to stock buybacks. Berkshire’s dynamic duo, as of the most recent quarter, were only allowed to buy back shares of their company if they fell to or below 120% of book value (i.e. no more than 20% above book value). At no point did Berkshire’s stock fall to or below this threshold, eliminating the ability that Buffett and Munger had to purchase their company’s stock.
But on July 17, 2018, Berkshire’s board changed the buyback rules, allowing Buffett and Munger to get off the proverbial couch. These new criteria allowed share buybacks with no cap or end date, as long as Berkshire Hathaway has at least $30 billion in cash, cash equivalents and U.S. Treasury securities on its balance sheet, and Buffett believes his company’s shares are intrinsically cheap. This last point is deliberately left subjective to give Berkshire’s chief the freedom to conduct buybacks as he sees fit.
Since mid-July 2018, Buffett has purchased nearly $78 billion worth of Berkshire Hathaway stock, which is by far more than he spent buying Berkshire Hathaway stock. Apple, Bank of AmericaAnd Western petroleum on one combined base.
But for the first time since Berkshire’s board changed the criteria for share buybacks more than six years ago, Buffett has it didn’t buy shares of his former favorite stocks in the third quarter. The Oracle of Omaha is an avid value investor, and Berkshire’s book value has reached levels last seen in 2008.
Image source: Getty Images.
However, there is a new stock that appears to be in Buffett’s eye, based on Berkshire Hathaway’s latest 13F filing. While buying activity for Berkshire’s brightest minds has been sparse since October 2022, during the third quarter, Buffett oversaw the addition of 1,277,256 shares of one of America’s most beloved consumer brands. Domino’s Pizza (NYSE:DPZ).
In the roughly 20 years since Domino’s initial public offering (IPO), its shares have skyrocketed by about 7,000%, including dividend payments. But one thing Domino’s Pizza and its board have never attempted is a forward stock split, which is intended to lower a company’s stock price and make it nominally more affordable to ordinary investors who don’t have access to purchasing fractional shares through their broker.
Following Buffett’s purchase of Domino’s stock during the quarter ending in September, the company’s shares are hovering around $439. This is a level that could put pressure on retail investors who may not want to save more than $400 to buy a single stock. In other words, the expectation is that Domino’s Pizza could potentially become the newest stock on Wall Street by 2025.
But Domino shareholders have more to look forward to than just the potential for stock split euphoria. More specifically, the management initiative ‘Hungry for MORE’ has delivered tangible results. The abbreviation ‘MORE’ stands for:
‘The most delicious food’, and the company’s efforts to stimulate new and returning customers with innovative products.
“Operational Excellence,” which is a function of the company’s technology-driven operating system and bottom-line-driving food preparation procedures.
Renowned value describes Domino’s efforts to reward loyal customers through its rewards program.
“Improve,” which has to do with leaning on franchisees’ experience to grow the company’s brand equity.
With management firmly putting its “Hungry for MORE” five-year plan into action, Warren Buffett’s new favorite stocks delivered 5.1% global retail sales growth in the third quarter, excluding currency movements. Most notably, the company is on track for its 31st consecutive year of same-store sales growth in international markets. Domino’s Pizza has had no trouble increasing brand awareness beyond the borders of the US
The other factor working in the company’s favor is trust. Domino’s started its business about 15 years ago mea culpa media campaign in which the company transparently admitted that its pizza was defective and promised to change things. While mea culpa campaigns don’t always work, Domino’s has been nothing short of a success with consumers. As long as Domino’s remains open and honest with its marketing, the end result could be a heavenly profit for the company’s shareholders.
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Bank of America is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool holds positions in and recommends Apple, Bank of America, Berkshire Hathaway and Domino’s Pizza. The Motley Fool recommends Occidental Petroleum. The Motley Fool has one disclosure policy.
Warren Buffett’s new favorite stock to buy — up 7,000% since its IPO — could be Wall Street’s newest stock split in 2025, originally published by The Motley Fool
