Famed junk food enthusiast Warren Buffett just bought stock in a national pizza chain that’s trading near its lowest level this year. A recent regulatory filing showed that Berkshire Hathaway, led by Chief Executive Officer Warren Buffett, bought more than 1.2 million shares of Domino’s Pizza last quarter, worth about $550 million. Given the small size of Berkshire’s vast portfolio (more than $300 billion in cash holdings alone), Buffett’s investment deputies Ted Weschler and Todd Combs Combs) may be behind the investment. Whatever the original idea, Domino’s Pizza is in line with other long-term investments by the giant Omaha-based conglomerate. Berkshire Hathaway already owns 100% of See’s Candy Co. and Dairy Queen, and lists Coca-Cola Co. and Oscar Meyer hot dog owner Kraft Heinz among its major holdings. Buffett, a 94-year-old billionaire known for his childlike eating habits, famously said he would happily drink five cans of Coke and eat McDonald’s every day. Yet despite his seemingly indulgent diet, Buffett remains in good health. “I eat like a six-year-old,” the Berkshire CEO once said. Buffett once famously quipped: “I’m a quarter of Coca-Cola.” In 2014, Berkshire invested $3 billion in Restaurant Brands International, the owner of Burger King and Tim Hortons in the 1990s. s owns a large stake in McDonald’s. Shares of DPZ Mountain Domino’s Pizza have lagged the S&P 500 so far this year. Value Bet Domino’s is in line with Berkshire’s value investing philosophy, focusing on cash flow, price-to-earnings ratio and price-to-book ratio criteria. Meanwhile, Berkshire may just have taken advantage of Domino’s sharp sell-off in July, when the stock fell 17%. Shares of the world’s largest pizza chain tumbled more than 13% in just one day, their worst drop since 2008, after the company told investors that sales would fall short of initial expectations and that it was opening more stores overseas. The number of new stores will be fewer than originally planned. FactSet data shows that Domino’s price-to-earnings ratio fell to 23.7 as a result, the lowest this year. Pizza Wars The pizza chain has struggled to grow sales in the U.S. as competition intensifies for cost-conscious customers. “Fundamentals remain under pressure in the near term,” said Barclays Capital analyst Jeffrey Bernstein. “Similar to the ‘burger wars’ of past years, management believes we are now in the ‘pizza wars,’ all The focus is on incremental value.” Even as Berkshire’s disclosure boosted Domino’s shares, the company’s shares are up only about 10% this year, lagging far behind the S&P 500’s 25% return. The Barclays analyst, who recently met with Domino’s management, said Berkshire’s newly disclosed stake was mentioned in the meeting but the company didn’t have much to add. “We don’t think they talked to Warren,” Bernstein told CNBC, referring to Domino’s management, but it’s possible executives “received questions from the group prior to the equity announcement.”
