Warren Buffett Holds Apple Stock Despite Tariffs and Buys a Restaurant Stock Up 4,500% in 15 Years

Globe and Mail

2 days ago

Warren Buffett manages the vast majority of Berkshire Hathaway 's stock portfolio, and the company made interesting capital allocation decisions concerning Apple (NASDAQ: AAPL) and Domino's Pizza (NASDAQ: DPZ) in the first quarter.
Berkshire continued to hold 300 million shares of Apple. The stock currently accounts for more than 20% of its portfolio, the largest position by a wide margin, which is somewhat surprising, given the uncertainty surrounding tariffs.
Berkshire bought 238,613 shares of Domino's Pizza, a restaurant stock up 4,500% in the last 15 years. Domino's was one of only seven stock purchases that Berkshire disclosed in the first quarter, but it still accounts for less than 1% of its portfolio.
Here's what investors should know about Apple and Domino's Pizza.
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Apple: The stock Berkshire held in the first quarter
Apple reported decent financial results in the second quarter of fiscal 2025, which ended in March. Revenue rose 5% to $95 billion, as double-digit growth in services sales offset sub-2% growth in iPhone sales. Generally accepted accounting principles (GAAP) earnings increased 8% to $1.65 per diluted share as the company continued to repurchase stock. But CEO Tim Cook warned visibility beyond June was limited due to tariffs.
The investment thesis for Apple centers on its leadership in global smartphone sales and its strong presence in other consumer electronics markets, including personal computers, smartwatches, and tablets. But devices are only half the equation. Apple must monetize its installed base (which exceeds 2.35 billion devices) with services like App Store fees and advertising, iCloud storage, Apple Pay, and subscription products like Apple TV+.
The company is executing fairly well on that strategy, but some investors are worried about its ability to monetize artificial intelligence (AI). Apple Intelligence -- a suite of generative AI capabilities -- has fallen flat with consumers since its introduction in October. The iPhone upgrade cycle many analysts predicted never materialized. And Apple has delayed what might have been the most exciting features: an improved version of conversational assistant Siri.
Apple Intelligence is currently free, but many analysts expect the company to monetize the platform eventually, possibly by charging a fee for the most sophisticated features. But that future still seems far away. And with smartphone sales forecast to increase at 4% annually through 2029, Apple's revenue growth is unlikely to be much better, at least in the near term.
Meanwhile, the company faces a potentially serious threat in recent changes to U.S. trade policy. The Trump administration may have reduced the tariffs on goods imported from China, which is where most iPhones are manufactured, but the president also threatened Apple with a 25% tariff if it chose to make iPhones in India rather than the United States.
Personally, I doubt President Trump will follow through on that threat, but Apple's future is still clouded by uncertainty. Can the company effectively monetize AI? To what extent will tariffs hurt profits? Not knowing the answer to those questions is a problem, especially when shares trade at 31 times earnings and earnings only increased 8% in the last quarter.
I think prospective investors should avoid the stock for now. However, current shareholders with confidence in Apple can follow Buffett's lead and stay invested, provided they are comfortable with the risks the company is facing.
Domino's Pizza: The stock Berkshire bought in the first quarter
Domino's reported mixed first-quarter financial results. Revenue increased 2.5% to $1.1 billion, which narrowly missed the consensus estimate. But GAAP net income increased 21% to $4.33 per diluted share, beating the $4.07 per diluted share Wall Street expected. Despite mixed results, the company gained market share across its U.S. and international stores, according to CEO Russell Weiner.
The investment thesis for Domino's centers on scale and operational excellence. It is the largest pizza company in the world. And its history of technology and menu innovation, coupled with its effective use of promotional cycles, makes me think the company can maintain or even expand its leadership in the coming years.
To elaborate, Domino's uses artificial intelligence and robotics to improve efficiency across its business. It produces 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 and surface insights from user comments on social media.
Domino's introduced its "Hungry for More" strategy in 2023. The framework targets three outcomes through 2028: 7% annual sales growth, excluding the impact of foreign currency; 8% annual operating income growth; and 1,100 annual store openings. The company fell short in the first quarter: Sales increased less than 5% excluding foreign currency impact, operating income was flat, and Domino's actually closed a net total of eight stores.
Wall Street estimates the company's earnings will increase at 6% annually through 2026. That makes the current valuation of 27 times earnings look expensive. I think investors should avoid this stock right now. Shares were cheaper in the first quarter, which could explain why Buffett added to Berkshire's stake.
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