Warren Buffett’s Surprising Move: Ditching Apple for a Tasty Alternative
A Shift in Strategy
Warren Buffett, the legendary investor, has made headlines once again by selling a massive chunk of Apple stock worth over $20 billion in the third quarter. This move has left many wondering what’s behind Buffett’s decision. While Berkshire Hathaway still owns a significant amount of Apple stock, valued at $70 billion, it’s clear that Buffett is diversifying his portfolio.
The Likely Culprit: Valuation
So, why is Buffett shying away from Apple? The answer lies in the stock’s valuation. With a price-to-earnings ratio (P/E) of 37, Apple’s stock looks overvalued, especially considering its slow growth rate. In the last three years, Apple’s revenue has only increased by 3%, barely keeping pace with inflation. Buffett is likely concerned that the stock will underperform due to its high earnings ratio and tepid growth.
A New Opportunity Emerges
On the other hand, Berkshire Hathaway has taken a stake in Domino’s Pizza, acquiring 3.5% of the company. This move may seem unexpected, but it’s rooted in Buffett’s fondness for the capital-light franchising model. Domino’s Pizza, like McDonald’s, operates a successful franchise model, and its plans for global expansion are impressive. The company aims to open 800 to 850 new stores this year, with a long-term goal of reaching 40,000 stores in 20 years.
Growth and Value Align
Domino’s Pizza’s growth potential is a major draw for Berkshire Hathaway. With a projected 7% sales growth and 8% operating income growth from 2026 to 2028, the company’s earnings are expected to increase at a durable rate. This, combined with its relatively low P/E ratio of 26, makes Domino’s Pizza an attractive investment opportunity.
A Recipe for Success
Domino’s Pizza’s robust capital returns program is another key factor in its appeal. The company has grown its dividend per share by 474% in the last 10 years, while reducing its shares outstanding by 38% through consistent share repurchases. These trends are likely to continue, making Domino’s Pizza a compelling choice for long-term investors.
A Contrarian Approach
While Apple’s stock may be priced to perfection, Domino’s Pizza offers a unique combination of growth and value. Buffett’s move highlights the importance of diversification and a contrarian approach to investing. By shifting away from Apple and toward Domino’s Pizza, Berkshire Hathaway is positioning itself for long-term success.
Leave a Reply