This Undervalued Restaurant Stock Is Up About 10% Since a Member of the Audience Mistakenly Asked About It at Berkshire Hathaway's Annual Meeting

Every year, investors from around the world gather in Omaha for a chance to talk to legendary investor Warren Buffett at the annual meeting for Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) shareholders. The 2025 gathering reportedly had 20,000 people in attendance, and many waited for hours for their chance to ask a question of the Oracle of Omaha.

One such member of the audience finally got his chance. He stepped up to the microphone and said, "Out of all the companies that Berkshire Hathaway owns, there was one that you acquired, the Chicago-based company Portillo's (NASDAQ: PTLO) -- hot dogs -- how did you know that this would be a good fit for the overall company's portfolio?"

Buffett was gracious but visibly confused by the question. And that's because Berkshire Hathaway didn't acquire Portillo's and has never invested in the stock -- it's not among the things that Berkshire Hathaway owns.

This appears to be a case of mistaken identity. In 2014, private equity firm Berkshire Partners -- not affiliated with Buffett's Berkshire Hathaway -- invested in Portillo's when it was still a privately held business.

Image source: Getty Images.

As of Dec. 29, Berkshire Partners was still the largest shareholder in Portillo's with a nearly 19% stake. But before the company's initial public offering (IPO) Berkshire Partners owned more than 60% of the outstanding shares, meaning its stake has decreased significantly. And, again, Berkshire Partners isn't Berkshire Hathaway.

That said, something strange happened immediately after the annual meeting for Berkshire Hathaway. Portillo's stock climbed about 10% over the next few trading sessions. Maybe it was just a coincidence. Or maybe, just maybe, people at Berkshire Hathaway's meeting decided to look into Portillo's and liked what they saw.

I'm only speculating, but I don't think this is as far-fetched as it sounds. In fact, I believe Portillo's stock offers at least one thing that Warren Buffett would appreciate: This restaurant stock is an incredible value stock right now.

Why Portillo's stock is a good value

"I think all good investing is value investing." -- longtime Buffett colleague Charlie Munger.

If investors can find a profitable business with years of growth opportunity that trades at a bargain price, they may have just found a winner. And that's what I believe Portillo's stock can be for investors over the next 10 years.

As of this writing, Portillo's stock has a market capitalization of $721 million -- this is the aggregate value of its shares. In other words, it would hypothetically cost someone this much to own the company outright. Let's suppose someone did that. How long would it be before their investment was paid back?

Consider that Portillo's had 94 restaurant locations at the end of the first quarter of 2025. These restaurants have generated $58 million in operating income over the last 12 months. Assuming the company continued to earn this much profit every year, then a hypothetical investor would make back their investment in 12 years -- in other words, it trades at 12 times its operating income. This isn't bad and suggests that Portillo's stock is a value stock.

That said, if Portillo's can grow its operating income, then it would be an even better value today. And I believe that it can grow its operating income in dramatic fashion.

This starts with Portillo's restaurant development plans. As mentioned, it has fewer than 100 locations today, but locations average $8.7 million in annual sales, which is outstanding and suggests strong consumer demand wherever it's located. For this reason, management plans to expand to meet that demand, targeting 12 new restaurant openings this year.

Annually, Portillo's plans to grow its restaurant base by 12% to 15%. This means its could potentially triple or quadruple in size over the next decade. Assuming the economics of the business hold strong, this is a company with the ability to grow its profits substantially.

Portillo's isn't as flashy of an investment idea as some other busineses. But restaurants with strong economics have made great investments in the past as they've grown from regional chains to national ones. Portillo's could be the latest. And buying it at a bargain price today certainly helps when it comes to future returns.

Some people might be finding out about Portillo's stock today because of a mistaken question at Berkshire Hathaway's meeting. But I find that sometimes the best investment ideas are ones that are stumbled upon seemingly by chance. The trick is to not waste good chances when they come along.

Should you invest $1,000 in Portillo's right now?

Before you buy stock in Portillo's, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Portillo's wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $614,911!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $714,958!*

Now, it’s worth noting Stock Advisor’s total average return is 907% — a market-crushing outperformance compared to 163% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of May 5, 2025

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.