Warren Buffett reportedly owns about 90 percent Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) portfolio of equity securities, while fellows Todd Combs and Ted Weschler handle the rest. The firm does not disclose which investment manager makes individual trades, but Buffett likely holds large positions such as an apple(NASDAQ: AAPL).
Although he once called Apple “the best business” in the world, Buffett sold 100 million shares in the third quarter, reducing Berkshire's stake by 25%. And while Apple still ranks as the company's largest holding as of September 30, Buffett has now sold more than 615 million shares in the last four quarters.
At that time, Berkshire took a very small position Domino's Pizza(NYSE: DPZ) in the third part. That stock is up 3,100% since its initial public offering (IPO) in July 2004, but has struggled recently. Shares are down 21% over the past three years, despite the decline in value S&P 500 it grew by 28 percent during that period.
Here's what investors should know about Apple and Domino's.
Apple has built brand authority and pricing power through engineering expertise. Its line of consumer electronics products is built on proprietary software that creates a seamless user experience across devices, and consumers are willing to pay for it. The average iPhone price was 3 times higher than the average Samsung smartphone price during the third quarter.
Apple has a strong presence in several consumer electronics markets, including a leadership position (as measured by sales) in smartphones. However, the company in recent years has expanded its focus beyond hardware. Nearby services such as App Store downloads, iCloud storage, and Apple Pay allow the company to effectively monetize its installed base of more than 2.2 billion active devices.
Apple reported modest financial results for the fourth quarter of fiscal 2024, which ended in September 2024. Revenue increased 6% on double-digit sales growth in the services segment, and mid-single-digit sales growth in Mac, iPad, and iPhone. parts. During that period, non-GAAP (adjusted) earnings rose 12% to $1.64 per diluted share.
Apple is a solid business, but not even the best business worth buying at any price. Apple's P/E ratio rose from 26 in April to 42 in December without a meaningful catalyst. Indeed, it recently introduced Apple intelligence, a suite of artificial intelligence capabilities for the new iPhones and MacBooks. But that hasn't started the boom cycle predicted by many analysts.
The current IP/E looks expensive because Wall Street expects Apple's earnings to grow 10% annually over the next three years. In my opinion, that makes the stock overvalued at its current price, and I think Warren Buffett made the right call in selling the stock. But some Wall Street analysts disagree. Dan Ives at Wedbush says Apple could be a $5 billion company within 18 months.
Domino's is the largest pizza company in the world as measured by sales and stores. The company delivers 1 in 3 pizzas in the US, according to The Wall Street Journal. Regular promotions and the recent relaunch of its loyalty program have helped Domino's build a reputation for offering value beyond similar peers. Papa John's International and Pizza Hut (owned by Yum! Brands).
As a result, Domino's is more likely to report same-store sales growth in recent years. In fact, its same-store sales rose seven quarters in a row despite somewhat difficult macroeconomic conditions caused by high inflation and rising interest rates, which made consumers especially selective. In comparison, Papa John's and Pizza Hut saw same-store sales decline in four of the last seven places.
Domino's reported mixed results for the third quarter. Revenue rose 5% to $1 billion, missing the 7% increase expected by Wall Street. However, generally accepted accounting principles (GAAP) earnings were lower at $4.19 per diluted share, which was better than the 13% decline analysts were expecting. The company opened a total of 72 stores in the third quarter, so that its total number of stores now exceeds 21,000.
CEO Russell Weiner told analysts on a third-quarter earnings call: “I continue to believe that we will deliver US same-store sales growth of 3% or more annually. And that's why I expect Domino's to continue to drive additional market share gains.” The company also reiterated its guidance for “annual revenue growth of approximately 8% from operating growth” through 2028.
To that end, Wall Street expects Domino's earnings to grow 8% annually over the next few years. The company's guidance and Wall Street's outlook may be strengthened given that Domino's expects a rebound in international sales in 2026, but the stock is still expensive at its current multiple of 26.6 times earnings. I think investors should wait for a better entry point.
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Trevor Jennewine has no position in any of the listed stocks. The Motley Fool has positions and recommends Apple, Berkshire Hathaway, and Domino's Pizza. The Motley Fool has a policy of disclosure.
Warren Buffett Sells Apple Stock and Buys Restaurant Up 3,100 Percent Since Its IPO was originally published by The Motley Fool.
