Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway (BRK.B, Financial) has acquired a $550 million stake in Domino's Pizza (DPZ, Financial). The addition of the pizza giant, now classified as a " systems company" within Berkshire's portfolio, has sparked curiosity about whether investors should follow Buffett's lead.
This acquisition is particularly notable given Domino's difficult year. In its second-quarter earnings report, the company lowered its global net store growth forecast due to challenges with one of its international franchisees. This led to a more than 13% drop in Domino's shares in July, potentially creating a value opportunity that Buffett, known for identifying such chances, seems to have seized.
Buffett, a long-time proponent of value investing, is famous for purchasing high-quality stocks at discounted prices. While buying Domino's was likely made with input from Berkshire's investment managers, Todd Combs and Ted Weschler, the acquisition aligns with Buffett's investment style. Despite Domino's current challenges, its strong brand, global presence, and opportunities for future growth likely attracted Buffett's attention.
Berkshire Hathaway's has decades of successful investing experience, which could be the signal of as a vote of confidence in Domino's long-term prospects. However, investors must consider the potential risks, particularly regarding the company's international expansion, before deciding whether to follow Buffett's investment in Domino's.
