The perfect pizza pitch

We didn't have much growing up.

My mother raised my brother and me on her own after she and my dad divorced. But she worked hard to make our lives as comfortable and memorable as possible, so I still have a lot of fond memories as a kid.

Teachable ones, too. I particularly remember how she handled my love of baseball and subsequent title of “Home Run King.”

I wasn't the biggest kid on my Little League team back in middle school. But when I connected my bat with a baseball, let me tell you…

I could drive that thing.

I relished this ability and the visuals that came with it: seeing the ball jump off my bat to sail over the fence. There was nothing quite like it.

My mom loved those moments almost as much as I did. So she told me she’d give me a silver dollar for every home run I hit.

I know a dollar means next to nothing now. But to a child back then – especially one growing up in a modest household – it felt like a fortune. And it made every new trip to the plate that much more exciting.

It also taught me an extremely valuable lesson, just as she intended: that all the hard work and discipline I put into practices and any resulting excellence deserved to be rewarded.

It’s a lesson that still holds true today for just about anything we put our hands to. Which is why I’m still so busy looking for home runs today.

Only now, I’m doing so in the stock market.

Here’s another lesson I’ve learned along the way: Home runs rarely come from swinging more often.

They come from swinging at the right opportunities.

If you doubt me, try reading The Science of Hitting by Ted Williams, published in 1971. It’s one of the greatest instructional books ever written.

Baseball fans know Williams as the last baseball player in decades to hit .400 – in large part because he approached his craft like an engineer. Most players rely on instinct, which can work out well. I’m not knocking that approach in and of itself.

But Williams relied on probabilities centered around one simple rule: “Get a good ball to hit.”

With that in mind, he carefully mapped out his strike zone, calculating where his batting average was highest… and where it fell dramatically. That way, he knew exactly where he was most effective.

Williams developed a now-famous chart, which included his "happy zone." That’s where he believed he could hit the best.

Pitches mere inches beyond that space or on the low outside corner, however, weren’t worth it. His expected average dropped sharply when he pursued those balls – by roughly 37%, he estimated.

So he didn’t waste his time, giving him more energy when the right moment did come along.

In the same way, there are investments worth swinging at and those that aren’t. It’s an easy analogy to make for any investor who’s read The Science of Hitting, which Warren Buffett apparently has.

The Oracle of Omaha has given due credit to Williams before, concluding that, “You don’t have to swing at everything. The trick in investing is just to sit there until you get a fat pitch.”

Do you know how much money that advice can save you, much less make you? Do you know how much less stressful your life can be by applying it?

I know Wall Street throws thousands of pitches at us every single day. TV programs, social media, “expert” advice from family, friends, and colleagues: They all tell you to swing at this or that.

Don’t consult your common sense. Don’t do research. Don’t wait for reasonable entry points.

Just buy it now! Now! Now!

But Buffett shrugs that kind of pressure off. Much like Ted Williams standing at home plate, he only swings for “sure things.”

I've tried that strategy out myself. And I can tell you it works for “little guy” investors, too, not just big shots like Buffett.

In fact, I’ve built my entire investing philosophy around this principle, both personally and professionally. That’s why, here at Wide Moat Research, we spend enormous amounts of time studying balance sheets, competitive advantages, management teams, capital allocation, and valuation.

Because I don't want to swing at just any pitch.

I want to swing when it counts.

That’s why I’ve got my eyes on Domino's Pizza (DPZ), which has recently moved into my strike zone.

Shares have fallen roughly 30% this year to trade around $298, well below their January 2022 peak of $564. That’s because DoorDash and Uber Eats have given independent pizza shops the same delivery opportunities, eroding Domino's previously unmatched advantage.

Its same-store sales have slowed as a result. And investors aren’t convinced incoming CEO Joe Jordan will do any better than retiring CEO Russel Weiner.

However, what they see as a clear miss, I see as a fat pitch well worth swinging at. After all, Domino's still commands a healthy slice of the U.S. pizza delivery market – and one of the restaurant industry’s strongest competitive positions.

More importantly, its franchise-heavy business model remains exceptionally attractive.

Franchisees generate roughly $166,000 in EBITDA (earnings before interest, taxes, depreciation, and amortization) per store. And Domino's then collects high-margin royalty income from them with limited capital requirements.

Last year alone, it generated about $672 million in free cash flow. That’s more than enough to continue in its current path of investing in technology, buying back stock, and raising its dividend.

A dividend, mind you, that’s already grown by a 19.3% compound annual growth rate (CAGR) since 2013.

The situation reminds me of the now privately owned Denny's. I recommended it in my Wide Moat Confidential small-cap service mere weeks before it was bought out, leading to 45% gains, or 163% annualized.

That’s not to say I'm predicting a buyout with Domino’s as well. But I do believe the market is once again overlooking a company’s worth.

After all, despite its share-price slump, analysts expect earnings per share (EPS) to still grow roughly 9% in both 2026 and 2027.

The truth is that great businesses go on sale from time to time when short-term sentiment overwhelms long-term fundamentals. And that's exactly when I like to start swinging.

The way I see it, Domino's is back on the menu and firmly within my strike zone.

Happy SWAN investing!

Brad Thomas
Editor, The Wide Moat Daily

Wide Moat Research recently reviewed the concept of HALO stocks: publicly traded companies that are immune to the threat of artificial intelligence (AI) rendering them obsolete.

And it’s hard to find businesses that are more HALO-ish than those centered around growing and making food.

If you want to diversify your portfolio outside of the AI trade, last week’s Wide Moat Show could be precisely what you’ve been waiting for.

Click here to watch the full episode.