Warren Buffett makes headlines every time he buys or sells a stock. Most recently, his holding company, Berkshire Hathaway, added two new stocks to its equity portfolio: Pool Corporation and Domino’s Pizza.
This is the first time Buffett has taken a stake in the largest pizza chain in the world, and it’s not a surprising pick. Domino’s is a pretty classic Buffett choice due to its global brand name, dominance in its industry, dividend, and resilience as a cheap eatery. But it’s also a mature company with steady, slow growth — sales were up 5.1% in the third quarter, with a 3% increase in comparable sales.
Are You Missing The Morning Scoop?Breakfast News delivers it all in a quick, Foolish, and free daily newsletter. Sign Up For Free »
If you invest like Buffett, Domino’s could be a candidate for your consideration. But not every individual investor should invest like Buffett. He runs a holding company and is answerable to shareholders, and his goals are different than the average investor’s.
If you have a long-term horizon and some appetite for risk, you might be interested in growth stocks that don’t fit the Buffett approach. They aren’t all super-risky tech bets, and many offer incredible growth opportunities without significantly upping the stakes. Consider Dutch Bros(NYSE: BROS), a relatively young coffee chain that’s demonstrating serious growth and has massive potential.
Dutch Bros is like every other coffee shop chain, serving up all kinds of custom coffee beverages. But it has developed a distinct brand and identity and attracted a loyal fan base of customers. It’s focused on speed and customer service, and its goal is to create an atmosphere of warmth and fun.
Although the first Dutch Bros shop has been around for 30 years, the company only started to roll out as a national chain a few years ago. It went public in 2021 with around 500 stores, and three years later, it has 950 stores in 18 U.S. states and growing.
The response has been positive, and sales have been growing dramatically. Revenue increased 28% year over year in the third quarter, and same-shop sales were up 2.7%. Management noted that same-shop transaction growth was the highest in two years. That’s important because it means people are buying more, and the same-shop sales growth isn’t all coming from price increases. It’s a sign of viability and growth potential.
Companies in high-growth stages are often unprofitable, as they spend more than they get to lay a strong foundation. Dutch Bros has been profitable for several quarters, including the last three. Net income increased from $13.4 million to $21.7 million in Q3.
Dutch Bros recently became cash-flow positive, which is a welcome update. Until now it has plowed money into store openings, and management said it now feels that it’s entering a new stage of being able to fully fund its growth.
Management is growing deliberately to keep a healthy financial profile, and it’s working. It had originally guided for 150 to 165 stores in 2024, but it curtailed that guidance to closer to 150 stores as it restructured its real estate plans. That’s short-term pain for long-term gain. Although the market sent Dutch Bros down after that announcement a few months ago, it came right back up after the solid Q3 showing.
Now that it has an improved real estate plan, management expects to open 160 new stores in 2025 and even more in 2026. It sees the opportunity for 4,000 stores over the next 10 to 15 years. Those new stores alone provide incredible growth opportunities, and along with same-store sales growth, Dutch Bros has massive potential.
The company recently rolled out mobile order and pay throughout its stores, and that could be a game-changer for the near-term growth supporting long-term growth. It also changed its executive team recently to make room for an experienced team to take it to the next level, and the new team is doing its job.
Dutch Bros may not make it into Buffett’s portfolio — yet — but it’s a top candidate for any investor looking for a strong growth stock.
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $350,915!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,492!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $473,142!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Domino’s Pizza. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.
