Warren Buffett officially stepped down as CEO of Berkshire Hathaway at the end of 2025. However, there have been no signs that his legendary investing prowess has faded.
His basic tenets of investing, such as taking a long-term approach, remain valuable. And while you should never blindly follow anyone's investment holdings, Berkshire Hathaway's stock investments seem like a good place to start.
According to the company's quarterly SEC filing, it held nearly 3 million shares of Domino's Pizza (DPZ +0.42%) as of Sept. 30. Here's why you should also own shares in the company, which is trading at an attractive valuation.
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Attracting a crowd
In addition to pizza, Domino's offers customers other menu items, such as wings, pasta, and desserts. The restaurant provides diners with convenience (pickup and delivery) and reasonable prices. That's proved a powerful combination.
The business remains sound. Even as consumers face economic challenges, including higher food prices and an uncertain job market, Domino's fiscal third-quarter same-store sales (comps) grew 5.2% in the U.S. and 1.7% internationally. The period ended on Sept. 7.
The world's largest pizza chain is not merely growing sales. Domino's has also been increasing profitability, with the period's operating income gaining 12.2% year over year.
Expansion opportunities
Despite approaching 70 years in existence, Domino's isn't yet a mature company with limited growth opportunities. Management continues to see room for expansion, and it has been opening new restaurants. At the end of the third quarter, Domino's had 21,750 locations. That's after opening 214 restaurants during the quarter and 748 over the past year. Most, 588 in the last 12 months, were international locations.
With 99% of its restaurants franchised, Domino's can expand cheaply. That's because the company doesn't need to make large investments for new locations and upkeep. Rather, Domino's receives an upfront fee from each location and an ongoing royalty fee based on sales. The company also sells the franchisees supplies.
Built to produce free cash flow
Its largely franchise model makes Domino's an asset-light business. That helps it maximize free cash flow (FCF). In the first three quarters of 2025, Domino's generated $495.6 million in FCF. What did it do with it? Management used the bulk, $397.2 million, to return cash to shareholders via dividends and share repurchases.
The company also has a history of raising dividends annually, which is a positive signal. That's because companies' boards of directors are loath to cut payouts due to the severe negative market reaction. Many investors interpret dividend increases as a positive indicator of management's confidence in the company's prospects.
NASDAQ: DPZ
Key Data Points
Attractive valuation
Domino's stock price rose 2.3% in the past year through Jan. 9, well below the S&P 500 index's 19.8% gain. But patient investors will be pleased to know that the stock trades at an attractive valuation as measured by the price-to-earnings (P/E) ratio. Domino's currently trades at a P/E ratio of 24. During the first half of 2025, it traded at a P/E multiple of about 30.
Domino's stock also looks attractively valued in comparison to the overall market, as measured by the S&P 500. The index has a P/E ratio of 31. The company is growing its sales and profits, generating strong free cash flow that gives it the ability to return cash to shareholders. Its attractive valuation makes the shares a compelling buy.
