The Tale of Two Stocks: Why Buffett Cut Bank Exposure But Doubled Down on Pizza Chains

In a surprising capital reallocation move this quarter, Warren Buffett’s Berkshire Hathaway has revealed a striking contrarian play: trimming a traditional financial services giant while expanding into a seemingly humble restaurant operator. The numbers tell a compelling story about diverging trajectories in the investment landscape.

The Numbers Behind Berkshire Hathaway’s Recent Reshuffling

Berkshire Hathaway executed notable portfolio adjustments during Q1 that signal shifting conviction across asset classes:

Bank of America Position Cut: The conglomerate shed 48,660,056 shares, reducing its Bank of America stake by 7%. Despite this trimming, BofA remains the fourth-largest holding in the portfolio, reflecting residual conviction but also apparent hesitation.

Domino’s Pizza Stake Expanded: Conversely, Berkshire added 238,613 shares to its Domino’s Pizza position, marking a 10% increase. Though still classified as a smaller portfolio piece, the directional commitment is unmistakable.

This rebalancing mirrors Buffett’s exit from Citigroup—a coordinated retreat from traditional banking that deserves scrutiny.

Bank of America: A Sound Business Facing Headwinds

On paper, Bank of America presents fortress-like fundamentals. The institution commands the second-largest domestic deposit base among U.S. banks, ranks third in investment banking revenue, and operates one of the nation’s largest merchant payment processing networks. Recent quarterly performance reinforced this strength: revenue climbed 6% to $27.4 billion, with GAAP earnings surging 18% to $0.90 per share.

The company’s confidence in economic resilience is evident in its credit loss provisioning: it allocated $1.5 billion—unchanged from the prior quarter and below consensus expectations. CEO Brian Moynihan emphasized that “consumers have shown resilience, continuing to spend and maintaining healthy credit quality.”

Yet here’s where the thesis fractures. Bank of America stock has gained 228% over the past decade, underperforming the broader S&P 500 by 10 percentage points—a significant miss for a mega-cap financial institution. The culprit likely stems from structural headwinds: net interest income comprises over half of BofA’s revenue stream. In an environment where interest rates may face downward pressure, this dependency becomes a material vulnerability.

Valuation complicates matters further. The stock trades at 1.7x tangible book value against a 10-year median of 1.5x—a premium despite tepid relative returns. Wall Street consensus suggests 10% upside at $50 per share (versus current $45.50), but such modest targets hardly justify premium valuations for an institution facing revenue pressure.

Domino’s Pizza: The Unlikely Outperformer

Domino’s trajectory presents a starkly different picture. The pizza company has seized global market leadership through disciplined execution: optimizing supply chains via regional facilities equipped with automation, deploying artificial intelligence to predict orders and inspect quality, and maintaining an innovation cadence that keeps competitors like Papa John’s and Pizza Hut trailing in same-store sales performance.

The investment thesis behind Buffett’s increased position becomes clear when examining long-term returns: Domino’s shares have surged 4,230% over the past 15 years, with 346% gains in the last decade alone—a performance that renders Bank of America’s comparable returns almost quaint by contrast.

First-quarter results proved mixed, with revenue growth of just 2.5% to $1.1 billion (missing expectations), though earnings jumped 21% to $4.33 per share. Management acknowledged missing its medium-term “Hungry for More” initiative targets—which aspire to 7% annual sales growth, 8% annual operating income growth (ex-FX), and 1,100 store openings yearly through 2028.

The company actually closed a net eight stores in Q1 and missed sales growth benchmarks, yet Wall Street maintains optimism. Analyst consensus projects 9% annual earnings growth over three years and a median price target of $530 per share (11% upside from current $447). At 26x earnings, the valuation appears rich—though the stock’s historical performance suggests investors have consistently underestimated execution capabilities.

The Deeper Strategic Insight

Buffett’s rebalancing gesture speaks volumes. Moving capital from a systemically important financial institution toward a disciplined consumer franchise with proven pricing power and operational excellence mirrors themes he’s championed for decades: choosing businesses with durable competitive advantages and management teams executing flawlessly.

While Bank of America deserves respect as a financial juggernaut, its structural challenges in a potentially lower-rate environment create meaningful headwinds. Domino’s, by contrast, demonstrates the power of consistent innovation, cost discipline, and market share expansion—the hallmarks of enduring value creation that transcend economic cycles.