Warren Buffett Just Purchased Domino’s Pizza Stock. Should you follow Him?

Berkshire Hathaway‘S (NYSE: BRK.A) (NYSE: BRK.B) quarterly 13-F filings always have a few surprises.

The updates show the stocks that Buffett’s conglomerate bought and sold in the previous quarter. The biggest surprise this time seemed to be the purchase of Berkshire Dominoes Pizza (NYSE:DPZ)the largest purchase in the quarter.

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Berkshire bought 1,277,256 shares of the global pizza delivery chain, which were worth $550 million at the end of the quarter. Shares of Domino’s rose after hours Thursday on the news, which is typical when Buffett’s company buys a new stock. Domino’s ended the after-hours session up 7.8%.

Buffett has some experience in the restaurant industry. Berkshire Hathaway fully owns Dairy Queen. At one point, Berkshire owned shares of McDonald’sbut otherwise it has avoided restaurant stocks in recent years and focused on sectors like energy, banking and technology. Buffett is also a major investor in Coca-colathat sees restaurants as an important customer base.

In some ways, stocks like Domino’s Pizza have many of the qualities that Buffett says he looks for in a stock. It has the leading brand in pizza delivery and a global presence in the industry. Because of its low prices, it’s also arguably a recession-proof company, at least compared to most restaurant stocks. The pizza delivery concept is also well established around the world, which should pave the way for further growth.

13-F filings provide no explanation of the purchases, so it’s up to observers to make an educated guess as to why Berkshire bought Domino’s. To get some clues, let’s take a look at Domino’s value proposition after its latest earnings report.

Domino’s was one of the best-performing stocks of the 2010s as the company reformulated its pizza recipe and invested in tools like digital order and delivery trackers. More recently, the stock has struggled to break out of the range it has traded in in recent years.

While same-store sales growth has stalled, recent results have been solid. U.S. same-store sales growth rose 3%, while international same-store sales growth rose 0.8%. Total sales in the quarter increased by 5%.

The company, whose operations are largely franchised, continues to grow and added 72 stores in the quarter, bringing its total number of stores to 21,002. More than two-thirds of these locations are in international markets, although the company is growing in both domestic and international markets.

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