Every quarter, I take a look at ‘13F’ regulatory filings. These show the stocks big-name investors in the US have been buying and selling (in the previous quarter). Over the weekend, I scanned Warren Buffett’s filing to see what the investment guru has been trading recently. Here’s a look at one stock he offloaded and one he bought for his investment vehicle, Berkshire Hathaway, in Q3.
In and out quickly
The stock Buffett sold was Ulta Beauty (NASDAQ: ULTA). It’s an American make-up and skincare chain that sells products from a vast range of brands. Filings show he sold 665,903 shares, equating to 96.5% of his holding.
This is an unusual move for Buffett. The reason I say this is that he only bought Ulta a few months ago. And in the past, he’s stressed the importance of long-term investing and said his favourite holding period’s ‘forever’. So I’m not sure what’s happened here.
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Maybe his team sees risks around rising levels of competition in the beauty space? This could potentially slow the company’s growth in the years ahead.
Personally, I think this stock still looks quite attractive. For starters, it sells products that are in high demand in today’s social media-focused world. According to Grand View Research, the global cosmetics market’s set to grow by over 6% a year between now and 2030.
Secondly, it’s very profitable. Last financial year (ended 31 January 2024), return on capital was over 40%. Third, the valuation seems very reasonable. Currently, the forward-looking price-to-earnings (P/E) ratio is just 16.
Given these positives, I haven’t ruled out investing in this company.
Grabbing a slice of Domino’s
Looking at his recent buys, one that stands out to me is Domino’s Pizza (NYSE: DPZ), the well-known restaruant chain that operates a franchising model. In Q3, Buffett bought 1.27m shares. That equates to around $550m worth of stock at today’s share price.
This is an interesting move, in my view. There’s certainly a lot to like about Domino’s from an investment perspective. Not only is it very profitable (return on capital last year was 73%) thanks to its huge brand but it also has a long track record when it comes to generating wealth for investors.
However, the stock’s quite expensive. Currently, the P/E ratio here’s about 26. That earnings multiple doesn’t leave much room for error. If earnings miss estimates, the stock could take a tumble.
I’m wondering if Buffett would have been better off grabbing a slice of the UK-listed version of Domino’s Pizza (LSE: DOM)? It holds the master franchise agreement to own, operate, and franchise Domino’s stores in the UK and the Republic of Ireland, and it has been a great investment in the long run.
This stock’s a fair bit cheaper than its US-listed peer. Currently, the P/E ratio is only 16.9, a far more attractive valuation.
Of course, this company’s markets are much smaller than those of its US-listed peer. So there’s less growth potential. And disposable income here in the UK is far lower than in America today. So it may not perform as well as the US-listed stock in the years ahead.
Still, the valuation gap’s significant. So, I think the stock is worth considering today.
