Buffett’s Berkshire Hathaway Bolsters Holdings in Apple and Domino’s Pizza

Warren Buffett’s investment strategy has propelled Berkshire Hathaway into a tier of companies with a trillion-dollar market value. The firm’s $77 billion cost basis in its $264 billion stock portfolio indicates that the average position has more than tripled since acquisition.

Wall Street Consensus on Major Holdings

Within Berkshire’s stock portfolio, prominently managed by Buffett, are stakes in Apple (NASDAQ: AAPL) and Domino’s Pizza (NASDAQ: DPZ). Analysts are overwhelmingly positive, giving both stocks a consensus “buy” rating, with median target prices suggesting potential increases over the next year:

• For Apple, analysts covering the stock set a median target price of $235, indicating a 13% upside from the current price of $207.
• Domino’s has a median target price of $530, suggesting a 7% upside from its current price of $495 based on 34 analysts’ coverage.

Investors can acquire a share of Apple and a share of Domino’s for less than $750 combined. Here are additional details.

1. Apple: Key Investment Drivers

Apple’s investment thesis is built on two main factors. First, the company excels in both software and hardware, securing its position as the top player in smartphone revenue. Innovations, such as a potential foldable iPhone, could strengthen its market dominance. Additionally, Apple maintains a strong presence in other electronic markets, such as personal computers and smartwatches.

The second key aspect is that Apple reported an active installed base exceeding 2.35 billion devices. This user base is monetized through services like the App Store, Apple Pay, and iCloud. Future growth prospects could involve leveraging artificial intelligence (AI) with a paid version of Apple Intelligence, which includes features aimed at enhancing user experience.

However, Apple Intelligence has not yet met expectations. An upgraded version of Siri, intended to improve functionality by utilizing personal data, has faced delays, as reported by Bloomberg. Nevertheless, Apple’s track record of innovation suggests potential for improvement in upcoming quarters.

In its second fiscal quarter ending March, Apple achieved a revenue increase of 5% to $95 billion, driven substantially by service sector growth. GAAP earnings rose by 8% to $1.65 per diluted share, supported by ongoing stock repurchases. However, CEO Tim Cook mentioned limited visibility on longer-term outlooks due to tariff impacts.

Wall Street projects Apple’s earnings growth at 6% annually through fiscal 2026, making its current valuation of 29 times earnings seem high. I would reconsider investing in Apple once it can demonstrate effective monetization of AI features. Until such advancements occur, I will refrain from purchasing the stock.

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Image source: Getty Images.

2. Domino’s Pizza: Operational Strengths

The investment case for Domino’s revolves around its scale and operational efficiency. By being the largest quick-service pizza chain, Domino’s has achieved notable success through technology innovations and strategic promotions that enhance its value proposition.

For example, the company employs AI and robotics for operational efficiencies. It utilizes centralized facilities with robotic systems to maintain consistent quality and control costs. Additionally, AI aids in analyzing customer feedback to drive insights.

Domino’s released mixed quarterly results in the first quarter. Revenue grew by 2.5% to $1.1 billion, slightly below estimates, while GAAP earnings surged 21% to $4.33 per diluted share, surpassing the expected $4.07. Notably, the company gained market share domestically and internationally, as indicated by CEO Russell Weiner.

In 2023, Domino’s unveiled its “Hungry for More” strategy, aiming for annual operating income growth of 8% through 2028. Although the company fell short in the first quarter with only a 3.6% increase in operating income (excluding foreign currency fluctuations and one-time expenses), management expresses confidence in achieving medium-term growth goals.

Projected earnings growth for Domino’s is also 6% annually through 2026, suggesting its current valuation of 28 times earnings may be steep. Even with the implied upside, I will not consider buying this stock unless its price declines by at least 20%.

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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Domino’s Pizza. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.