Each quarter, Berkshire Hathaway‘s obligated to publish a document (known as a 13F filing) which shows the current investment holdings it has. Warren Buffett might be in his 90’s, but he’s still actively involved in decisions that relate to what the company buys and sells. The Q3 filing’s just out, with some interesting changes worth noting.
Fresh out the kitchen
Let’s start with a new stock addition. The notable one was a $557m notional buy of Domino’s Pizza (NYSE:DPZ), equating to almost 1.28m shares.
I can understand why this might have ticked a lot of boxes for Buffett and his team over at Berkshire. Buffett’s famous for liking consumer staple businesses that have a strong track record over a long time. Domino’s was founded in 1960 by two brothers in Michigan. It has expanded over the decades, but essentially is still tied to making a simple product (pizza) well.
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Buffett also likes value stocks. Even though I wouldn’t say Domino’s is very undervalued at the moment, it has lagged the broader market performance. Over the past year, the stock’s up 15%, but not close to even 52-week highs. This compares to the 30% gain from the S&P 500 that’s made fresh highs on a regular basis this year.
However, I’m not that interested in following suit and purchasing now. I don’t see anything that exciting going on at the company. Q3 results showed revenue growth of 5.1% versus the same period last year, with net income down 0.5%. This doesn’t strike me as a company that’s pushing ahead, or one that’s seeing an influx of customer demand.
Not as pretty
On the flipside, Berkshire Hathaway reduced it’s holdings in Ulta Beauty (NASDAQ:ULTA) almost completely. This comes after buying over $260m worth of the stock just the quarter before.
The stock’s down 10% over the past year, but from my rough calculations Buffett hasn’t lost money on this based on when he likely bought and sold.
It’s unusual for the company to trade in and out of a holding over such a short period, so maybe there’s something we aren’t aware of right now. However, based on the information I have, I don’t agree with the move.
It’s true that Ulta has been under pressure recently with tougher competition in the beauty space. However, the latest Q2 results showed several positive signs. The Q3 results are due out in a couple of weeks so I’m surprised Berkshire and Buffett didn’t wait for this update before making a more informed decision.
Certainly as a long-term investor, I’d be waiting for more information before making this call. Admittedly, I don’t own the stock, so ultimately can’t fault Buffett as he’s the one with skin in the game.
