Buffet's Recent Preferred Stock Purchase – A Title with a 7000% Increase Since Its Debut, Potentially Becoming Wall Street's Upcoming Stock-Split Option in 2025
Few, if any, financiers grab attention on Wall Street like the titan of Berkshire Hathaway (BRK.A -1.29%) (BRK.B -1.41%), led by CEO Warren Buffett. Taking charge in the mid-1960s, the moniker "Wizard of Omaha" has administered staggering cumulative returns for Berkshire's Class A shares (BRK.A) to an astounding 5,700,000%.
Eclipsing the annualized total return of the benchmark S&P 500 for over six decades is enough to catch the attention of investors. Some enthusiasts have made it a practice to mimic Buffett's trades to seize substantial long-term rewards.
Investors can monitor Buffett's activities via Berkshire's quarterly 13F filing, which was submitted on Nov. 14. A 13F offers a concise rundown of the stocks Wall Street's sharpest money managers have purchased and sold in the last quarter (in this case, the September-ended quarter). Even though 13Fs have their flaws – as they're typically published up to 45 days after the quarter ends, the data may lag for active hedge funds – they can still provide insight into the stocks and trends piquing the interest of Wall Street's leading fund managers.
Despite Warren Buffett having been a net seller of stocks for eight consecutive quarters, the standout acquisition from Berkshire's third-quarter 13F is a beloved household brand that Buffett is suddenly hoarding.
The Oracle of Omaha's prior favorite stock is moved to the back burner in the third quarter
Up until mid-2024, there was no questioning which stock held Buffett's heart above all others: Berkshire's own shares.
Before July 2018, Buffett and his right-hand man, Charlie Munger – who regrettably passed away in November 2023 – were confined in their share buyback authority. The pair was only allowed to buy back their company's shares if they were selling at or below 120% of book value (i.e., no more than 20% above book value). Until the most recent quarter, Berkshire's stock never declined to that threshold, leaving no opportunity for Buffett and Munger to purchase their company's shares.
However, Berkshire's board altered the regulations governing buybacks on July 17, 2018, allowing Buffett and Munger to cut loose from the proverbial sidelines. These new regulations enabled share repurchases without a cap or expiration date as long as Berkshire Hathaway had at least $30 billion in cash, cash equivalents, and U.S. Treasuries on its balance sheet, and Buffett deemed shares of his company as undervalued. This subjective criteria gave Berkshire's CEO the freedom to carry out buybacks at his discretion.
Since the mid-point of July 2018, Buffett has purchased around $78 billion worth of Berkshire Hathaway stock, surpassing his investments in Apple, Bank of America, and Occidental Petroleum when combined.
But for the first time since Berkshire's board adjusted the criteria for share repurchases over six years ago, Buffett didn't buy shares of his former favorite stock during the third quarter. The Wizard of Omaha is a disciplined value investor, and Berkshire's book value touched levels last seen in 2008.
Buffett's new favorite stock could be on the verge of a split in 2025
This new stock that appears to have captured Buffett's interest, according to Berkshire Hathaway's latest 13F filing, is a beloved American consumer brand. Although Berkshire's top minds have been pretty vocal on stock purchases since October 2022, Buffett oversaw the addition of 1,277,256 shares of one of the country's best-loved consumer brands during the third quarter, Domino's Pizza (DPZ -0.40%).
In the twenty years following Domino's initial public offering (IPO) – which took place roughly two decades ago – shares have skyrocketed by approximately 7,000%, including dividend payments. However, one thing Domino's Pizza and its board have never undertaken is a forward stock split, which essentially lowers a company's share price to make it more financially within reach for everyday investors who can only invest in full shares through their broker.
Following Buffett's acquisition of Domino's stock during the September-ended quarter, shares of the company have hovered around $439. This could potentially put retail investors in a predicament, forcing them to save up more than $400 to buy a single share. In other words, the stage is set for Domino's Pizza to potentially become the next stock for Wall Street to focus on a stock split in 2025.
However, there's more to look forward to for Domino's shareholders than just the anticipation of a stock-split frenzy. Specifically, management's "Hungry for MORE" initiative has proven to be a positive influence. The "MORE" acronym represents:
- "Most delicious food," which is aimed at attracting new and returning customers with innovative products.
- "Operational excellence," which is a testament to the company's tech-oriented operating system and profit-boosting food preparation procedures.
- "Renowned value," which signifies the company's efforts to reward its loyal customers through its rewards program.
- "Enhancing," which involves leveraging the input of its franchisees to elevate the value of its brand.
Under Domino's Pizza's CEO Warren Buffett's preferred stock, the business notched a 5.1% surge in global retail sales during the third quarter, leaving out foreign currency fluctuations. The corporation is on a roll, aiming for its 31st consecutive year of identical sales growth in international markets. Domino's Pizza has effortlessly broadened its brand recognition beyond the United States borders.
An additional advantage Domino's has is consumer trust.About 15 years ago, the company initiated a public apology campaign, confessing its pizza wasn't up to the mark and pledging to improve. Apology campaigns don't always yield results, but Domino's managed to strike gold with consumers. As long as Domino's continues to be upfront and honest in its marketing, the benefits might soar to unprecedented heights for its shareholders.
In the world of finance, investors often keep a close eye on Warren Buffett's moves, as seen in his net selling of stocks for eight consecutive quarters. To stay informed, they can analyze Berkshire Hathaway's quarterly 13F filings, which provide insight into the stocks that have caught the attention of Wall Street's leading fund managers.
For instance, Buffett's latest 13F filing shows a significant change in his investment strategy, with a notable increase in Domino's Pizza shares. This move could potentially signal a shift in his favoritism, as he added over a million shares of the beloved American consumer brand during the third quarter.
