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Warren Buffett's knack for investing has made Berkshire Hathaway a very successful business. It is one of a handful of companies to achieve a trillion-dollar market value, and the $77 billion cost basis on its $264 billion stock portfolio means the average position has more than tripled.
Included in Berkshire's stock portfolio, the majority of which is managed by Buffett, are positions in Apple (NASDAQ: AAPL) and Domino's Pizza (NASDAQ: DPZ). Wall Street has a consensus rating of "buy" on the stocks, and the median target prices suggest both are headed higher in the next year:
Importantly, investors who agree with Wall Street can buy one share of Apple and one share of Domino's for less than $750 total. Here are the important details.
The investment thesis for Apple is twofold. First, engineering expertise that spans software and hardware has helped the company become the global leader in smartphone revenue. And product innovations like a foldable iPhone could help Apple maintain its leadership. The company also has a strong presence in other consumer electronics verticals, including personal computers, smartwatches, and tablets.
Second, Apple reported an installed base exceeding 2.35 billion active devices in the first quarter. It already monetizes those users with adjacent services like the App Store, Apple Pay, and iCloud storage. But it has an opportunity to further monetize its installed base with artificial intelligence (AI) via a paid version of Apple Intelligence, a suite of currently free features that draft text, summarize content, and improve notifications.
Importantly, Apple Intelligence has not been the big success the company envisioned. One reason is the upgraded Siri -- which promised to make the conversational assistant more useful by letting it tap personal data and on-screen content to answer questions -- has been delayed indefinitely, according to Bloomberg. But Apple has demonstrated an immense capacity for innovation over the years, so it could turn things around in the coming quarters.
Apple reported reasonably good financial results in the second quarter of fiscal 2025, which ended in March. Revenue increased 5% to $95 billion, driven by double-digit sales growth in the services segment. Meanwhile, generally accepted accounting principles (GAAP) earnings increased 8% to $1.65 per diluted share, outpacing top-line growth because the company continued to repurchase stock. However, CEO Tim Cook said visibility beyond June was limited due to tariffs.
Wall Street expects Apple's earnings to increase at 6% annually through fiscal 2026, which ends in September. That makes the current valuation of 29 times earnings look expensive.
I'd be willing to buy the stock once Apple demonstrates it can bring AI upgrades to Siri and monetize Apple Intelligence more broadly. In that scenario, earnings could grow faster than Wall Street anticipates. Until then, I plan to avoid the stock.
Image source: Getty Images.
The investment thesis for Domino's centers on scale and operational excellence. It is the largest quick-service pizza company in the world, and its success is due in large part to consistent technology and menu innovation, as well as effective promotions that have trained consumers to associate the brand with good value.
For instance, Domino's uses artificial intelligence and robotics to improve efficiency across its business. The company manufactures dough in a centralized facility equipped with robots to control costs and maintain a consistent customer experience across stores. It also uses AI to visually inspect orders, as well as surface insights from customer comments on social media.
Domino's reported mixed financial results in the first quarter. Revenue increased 2.5% to $1.1 billion, which narrowly missed the consensus estimate. But GAAP earnings rose 21% to $4.33 per diluted share, topping the $4.07 per diluted share Wall Street anticipated. Despite mixed results, the company gained market share across its U.S. and international stores, according to CEO Russell Weiner.
Importantly, Domino's introduced its "Hungry for More" strategy in 2023, which targets 8% annual operating income growth through 2028. The company missed that goal in the first quarter. Operating income increased just 3.6%, excluding the impact of foreign currency and one-time expenses. However, management remains confident in its medium-term target.
Wall Street estimates the company's earnings will increase 6% annually through 2026. That makes the current valuation of 28 times earnings look expensive. In fact, the stock would be expensive even if Domino's achieves its medium-term guidance of 8% annual profit growth over the next three years. Despite the upside implied by the median target price, I wouldn't buy this stock unless its price dropped by at least 20%.
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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Domino's Pizza. The Motley Fool has a disclosure policy.
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