Warren Buffett, the Oracle of Omaha, is at it again. He proved that he knows how to spot a good opportunity when he sees one. In his latest move, Buffett’s Berkshire Hathaway has invested heavily in two unusual but innovative companies. What are they? None other than Domino’s Pizza and Pool Corp.
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According to the most recent filing with the Securities and Exchange Commission, reported by TheStreet, Berkshire acquired 1.28 million shares of Domino’s, which were worth $550 million at the end of the third quarter. The holding company also bought more than 400,000 shares of Pool Corp., the largest distributor of swimming equipment and supplies in the US.
Both companies’ shares jumped on the news as investors followed Buffett’s lead. Domino’s stock is up 8.5% year-to-date and 20% over the past year. Pool Corp., though down 9% year-to-date, has seen a modest 3.5% year-over-year increase.
Buffett has long praised the value of brands as economic vehicles. This means that they protect the company’s market place from competitors. “A strong brand is a powerful thing,” Buffett famously said. Domino’s and Pool Corp. everything shows this.
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Domino’s has built an empire around its efficient delivery model and recognizable branding. It’s the largest pizza chain in the US for a reason. Despite the lack of financial expectations in its third-quarter earnings, the company beat Wall Street estimates for profitability and continues to show strength. Analysts, such as those at Loop Capital, recently upgraded the stock. They see signs of rapid same-store sales.
Pool Corp., on the other hand, benefits from a large market share in a niche but important industry. Even as a specialized use in building pool dips, the company continues to see a great demand for maintenance products, which drives its constant revenue. Oppenheimer recently raised its price target on Pool Corp. after its quarterly earnings beat estimates.
“He doesn’t invest – take a bat – unless the opportunity looks good,” Microsoft founder Bill Gates said of Buffett. These investments fit perfectly in that way. Domino’s and Pool Corp. it reflects the enduring appeal and common demand, which are key factors in Berkshire’s portfolio strategy.