Warren Buffett’s 10 New Stock Picks

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1. Domino’s Pizza Inc (NYSE:DPZ)

Shares held by Berkshire Hathaway: 1.28 million

Stake Acquired: Q3 2024

Last but not least, Berkshire also disclosed a new stake in Domino’s Pizza Inc (NYSE:DPZ) valued at $549.40 million in its latest 13F filing. Domino’s is one of the largest pizza delivery companies in the world with a presence in 90 countries. It is also one of the most recognized pizza brands in the world. The company mainly operates through a franchise model with most locations owned by franchisees. Domino’s Pizza Inc (NYSE:DPZ) has been quickly adapting to the changing environment by adopting digital solutions to streamline ordering and delivery processes.

As a large company, Domino’s Pizza Inc (NYSE:DPZ) is delivering steady revenue and profitability, while its scale allows it to negotiate with suppliers and invest in technology that allows it to expand its margins. The company has generated nearly $500 million in free cash flow for the trailing 12 months. Moreover, the company has been steadily growing its dividends for nearly two decades and is currently paying a quarterly dividend of $1.51 per share, which translates into a dividend yield of 1.35%.

However, all the positives that make Domino’s Pizza Inc (NYSE:DPZ) a solid investment come at a premium. The stock is trading at 25 times its forward earnings, which is substantially higher than some of its competitors. For example Papa John’s International (NASDAQ:PZZA) is trading at 17 times forward earnings. In addition, even though it has a solid cash position, Domino’s Pizza Inc (NYSE:DPZ) has quite a big debt pile of more than $5 billion against $165 million in cash. For a cash generating business this much debt is probably not a concern at this point, but in a high interest rate environment this could result in higher interest expenses.

While we acknowledge the potential of DPZ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DPZ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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