Few if any money managers command attention on Wall Street quite like Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett. Since ascending to the role as Berkshire’s chief in the mid-1960s, the aptly named “Oracle of Omaha” has overseen a scorching-hot cumulative return in his company’s Class A shares (BRK.A) of nearly 5,700,000%.
Nearly doubling up the annualized total return of the benchmark S&P 500 spanning six decades is bound to get a money manager noticed. In fact, some investors have made a habit of mirroring Buffett’s trades in order to ride his coattails to substantial long-term gains.
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Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
The way investors are able to track Buffett’s trading activity is via Berkshire’s quarterly 13F filing, which was filed on Nov. 14. A 13F provides investors with a concise snapshot of which stocks Wall Street’s smartest asset managers purchased and sold in the latest quarter (in this case, the September-ended quarter). Though 13Fs aren’t perfect — since they’re filed up to 45 days after a quarter ends, the data might be stale for active hedge funds — they can nevertheless clue investors into the stocks and trends piquing the interest of Wall Street’s leading money managers.
While Warren Buffett has been net seller of stocks for eight consecutive quarters, the arguable highlight of Berkshire’s third-quarter 13F is the beloved consumer brand he’s suddenly piling into.
Through the midpoint of 2024, there was no question which stock the Oracle of Omaha favored more than any other: shares of his own company.
Prior to 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 share buybacks. Berkshire’s dynamic duo was only allowed to repurchase shares of their company’s stock if it fell to or below 120% of book value (i.e., no more than 20% above book value), as of the most recent quarter. At no point did Berkshire’s stock fall to or below this threshold, thereby eliminating any opportunity Buffett and Munger had to purchase their company’s stock.
But on July 17, 2018, Berkshire’s board amended the rules governing buybacks to allow Buffett and Munger to get off the proverbial bench. These new criteria allowed for share repurchases with no ceiling or end date as long as Berkshire Hathaway has at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet, and Buffett believes shares of his company are intrinsically cheap. This last point is left intentionally subjective to give Berkshire’s chief the freedom to execute buybacks as he sees fit.
Since the midpoint of July 2018, Buffett has purchased almost $78 billion worth of Berkshire Hathaway stock, which is far and away more than he’s spent buying shares of Apple, Bank of America, and Occidental Petroleum on a combined basis.
But for the first time since Berkshire’s board amended the criteria governing share repurchases more than six years ago, Buffett didn’t purchase shares of his former favorite stock during the third quarter. The Oracle of Omaha is an ardent value investor, and Berkshire’s book value has reached levels last seen in 2008.
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However, there’s a new stock that appears to be the apple of Buffett’s eye, based on Berkshire Hathaway’s latest 13F filing. Though buying activity has been sparse for Berkshire’s brightest minds since October 2022, Buffett oversaw the addition of 1,277,256 shares of one of America’s most-beloved consumer brands during the third quarter, Domino’s Pizza (NYSE: DPZ).
In the roughly 20 years following Domino’s initial public offering (IPO), shares have skyrocketed higher by approximately 7,000%, including dividend payments. But one thing Domino’s Pizza and its board have never undertaken is a forward stock split, which is designed to reduce a company’s share price to make it more nominally affordable for everyday investors who lack access to fractional-share purchasing through their broker.
Following Buffett’s purchase of Domino’s stock during the September-ended quarter, shares of the company are hovering around $439. This is a level that could pressure retail investors who may not want to save up more than $400 to buy a single share. In other words, the table is set for Domino’s Pizza to potentially become Wall Street’s newest stock-split stock in 2025.
But Domino’s shareholders have more to look forward to than just the potential for stock-split euphoria. More specifically, management’s “Hungry for MORE” initiative has been tangibly paying off. The “MORE” acronym stands for:
“Most delicious food,” and the company’s efforts to drive new and repeat business with innovative products.
“Operational excellence,” which is a function of the company’s tech-driven operating system and bottom-line-boosting food-prep procedures.
“Renowned value,” which describes Domino’s efforts to reward loyal customers through its rewards program.
“Enhancing,” which has to do with leaning on the experience of its franchisees to grow the company’s brand value.
With management’s five-year “Hungry for MORE” plan firmly in place, Warren Buffett’s new favorite stock drove 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 U.S.
The other factor working in the company’s favor is trust. Roughly 15 years ago, Domino’s began its mea culpa media campaign where it transparently admitted its pizza wasn’t up to par and vowed to change things. While mea culpa campaigns don’t always work, Domino’s hit nothing short of a home run with consumers. As long as Domino’s remains open and honest with its marketing, the end result might be pie-in-the-sky gains 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 has positions in and recommends Apple, Bank of America, Berkshire Hathaway, and Domino’s Pizza. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
