FRI, NOV 15, 2024

WARREN BUFFETT WATCH

Domino's is Berkshire's biggest Q3 buy — and it's not that big

Berkshire has been selling far more stock than it's been buying lately, as evidenced by its record $325 billion in cash, but it did make one somewhat substantial purchase during the third quarter.

The company's 13-F portfolio snapshot filed with the SEC yesterday reveals that as of September 30 it held almost 1.3 million shares of Domino's Pizza.

A Domino's Pizza restaurant in Los Angeles, July 18, 2018. REUTERS/Lucy Nicholson

At today's close of $430.43, they're worth $550 million. That's relatively small for Berkshire (around 0.2% of the portfolio's total value) and a clear indication that one of the portfolio managers made the decision to buy, not Buffett himself.

Initially, the stock rallied on the news, going as high as $460 in a very brief spike at today's open.

It stayed positive until midday but gave up all its gains to close at $430.43, down 1.3% on the day.

Amid worries about softening consumer demand for eating out, Domino's stock fell 24% between mid-June and mid-July, a drop that could have been seen in Omaha as a buying opportunity.

Small POOL stake prompts short-lived rally

Berkshire also added an extremely small stake of roughly $150 million in Pool Corporation, a Louisiana-based wholesale distributor of swimming pool supplies and equipment.

That stock gained as much as 6% in today's trading but then erased almost all of the increase to close up 0.5%.

Ulta Beauty quickly fades in Berkshire's portfolio

It was just three months ago that we learned Berkshire Hathaway had given Ulta Beauty what one analyst called a "big stamp of approval" with the addition of a roughly $266 million stake during the second quarter.

Thursday's filing revealed an abrupt turnaround.

During the third quarter, Berkshire sold 96.5% of its 690 thousand shares, leaving 24,003 shares valued at less than $9 million today.

An Ulta Beauty store in Manhattan, March 8, 2022. REUTERS/Carlo Allegri

The stock fell as much as 5.5% today before closing down 4.6%.

It's dropped by almost 22% so far this year.

In August, Ulta's fiscal second quarter earnings fell short of Wall Street's expectations and it reduced its full-year guidance, citing a drop in same-store sales.

Bad day for Berkshire copy-cats

Rapid turnarounds like the Ulta reversal are still unusual for Berkshire but they are becoming more common.

That may be contributing to a weakening of the Berkshire copy-cat effect, as demonstrated by the failure of Domino's and Pool Corp to keep their gains while Ulta fell and mostly stayed down.

Another possible factor: copy-cats are realizing they're following the lead of the portfolio managers, not Buffett, on the smaller stakes.

Other moves

Apple's 25% reduction was first revealed almost two weeks ago in Berkshire's Q3 quarterly financial report.
The Bank of America position was reduced with additional sales after September 30. Berkshire held 766 million shares as of October 15 when its stake fell below 10%, relieving it of the obligation to report new moves within two business days. We probably won't know more until Berkshire's Q4 portfolio snapshot in mid-February.
Capital One was cut by 7%, adding to its 27% reduction in the second quarter.
Charter Communications was chopped by 26%. The position hasn't changed since early 2022, but it is down by almost three-quarters from its high point in early 2016.
Floor & Decor was completely eliminated. It was first added to the portfolio in mid-2021, with a large increase in 2022's first quarter.
Heico, which first appeared in the portfolio in the second quarter, was nudged 0.5% higher.
The Liberty Media Sirius XM tracking stocks, LSXMA and LSXMK, were exchanged for Sirius XM Holding shares as part of a reorganization in September.
Nu Holdings was cut by 19%. It is the first reduction since the stock was added to the portfolio in late 2021. Shares of the Brazilian fintech closed down 7.4% today.

BUFFETT AROUND THE INTERNET

Some links may require a subscription

Wall Street Journal on MSN: Does Warren Buffett Know Something That We Don’t?

The Journal podcast: Does Warren Buffett Know Something We Don’t?

Morningstar: After Earnings, Is Berkshire Stock a Buy, a Sell, or Fairly Valued?

Bloomberg (subscriber): ETF IQ: Who Actually Wants a Leveraged Warren Buffett Fund?

HIGHLIGHTS FROM THE ARCHIVE

Buffett on the importance of caring for the body and mind (2002)

A teacher asks Warren Buffett how to advise students on preparing for retirement. Buffett says young people should treat their minds and bodies like "the only car you're going to have for the rest of your life."

BERKSHIRE STOCK WATCH

Four weeks

Twelve months

BERKSHIRE'S TOP U.S. STOCK HOLDINGS - Nov. 15, 2024

Berkshire's top holdings of disclosed publicly traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today's closing prices.

Holdings are as of September 30, 2024 as reported in Berkshire Hathaway's 13F filing on November 14, 2024, except for:

Bank of America, which is as of October 15, 2024
Mitsubishi, which is as of June 12, 2023. Tokyo Stock Exchange prices are converted to U.S. dollars from Japanese yen.

The full list of holdings and current market values is available from CNBC.com's Berkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don't forward questions or comments to Buffett himself.)

If you aren't already subscribed to this newsletter, you can sign up here.

Also, Buffett's annual letters to shareholders are highly-recommended reading. There are collected here on Berkshire's website.

-- Alex Crippen, Editor, Warren Buffett Watch

900 Sylvan Avenue, Englewood Cliffs, NJ 07632

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