Forecast: Three Relentless Warren Buffett Shares Earmarked to Emerge as Wall Street's Successive Stock-Split Shares in 2025
Over the past two years, artificial intelligence (AI) has been the talk of the town on Wall Street, with investors excited about its virtually limitless potential. However, AI isn't the only factor driving the broader market's rise. In 2024, stock splits have played a significant role, fueling excitement in the market.
A stock split is a tool that publicly traded companies use to adjust their share price and outstanding share count by the same factor. This adjustment is purely cosmetic, not affecting a company's market cap or operational performance.
Since the beginning of 2024, over a dozen high-profile companies have completed stock splits. The latest company to join this trend is cybersecurity giant Palo Alto Networks. It's likely that we'll see this stock-split enthusiasm continue into the new year.
However, Wall Street's next set of stock-split contenders might surprise you. They could come from Warren Buffett's $299 billion portfolio at Berkshire Hathaway (BRK.A 0.41% / BRK.B 0.25%). Among the more than three dozen stocks that Buffett oversees, three appear to be ripe for a split in 2025.
Domino's Pizza
The first company in Buffett's portfolio that might announce a stock split in 2025 is fast-food restaurant chain Domino's Pizza (DPZ -0.23%). Despite Domino's stock having surged by around 7,200% since its IPO in July 2004, including dividends, the company's board has never authorized a split. With the company's shares currently hovering in the mid-$400s, the urgency for a split is growing.
Domino's success can be traced back to operational changes that the company made about 15 years ago. In 2009, the company launched a mea culpa-style advertising campaign, admitting that its pizza wasn't up to par and that it had missed the mark with consumers. While not all mea culpa marketing campaigns are successful, Domino's was an exception, regaining consumers' trust and gaining a second chance.
In addition, Domino's has leveraged various forms of innovation to drive growth. The company's current five-year plan, called "Hungry for MORE," relies on technology to improve its supply chain and on new service programs to expedite order times and maintain production quality.
Furthermore, Domino's has gained worldwide popularity. According to CEO Russell Weiner, "In our international business, we are on track for our 31st consecutive year of same store sales growth." The strength of the Domino's brand, coupled with the changes the company has made to improve its production process, is resonating with consumers around the globe.
As a result, it's no wonder that Domino's Pizza stock has surged by over 7,200% since its IPO, and it seems only a matter of time before the company's board decides to split its shares.
American Express
A second intriguing Warren Buffett stock that could become one of Wall Street's most-discussed stock-split stocks in 2025 is credit-services provider American Express (AXP -0.18%). Often simply called "AmEx," American Express is Berkshire Hathaway's second-longest-held stock, having been in the portfolio since 1991.
The last time AmEx conducted a stock split was in 2000. However, the ability to purchase fractional shares at online brokerages has reduced the need for stock splits since then. American Express's shares surpassing $300 for the first time could persuade its board to declare a split in the new year.
One reason American Express continues to impress investors is its longevity. Even though recessions are an inevitable part of the economic cycle, downturns in the U.S. economy are typically short-lived. While nine out of 12 U.S. recessions since World War II have ended within a year, most periods of economic expansion have lasted for multiple years.
Beyond macro factors, American Express benefits from being able to serve both sides of the transaction. In the U.S., it's the No. 3 payment processor by credit card network purchase volume, generating predictable fees from merchants. At the same time, it's a lender, bringing in annual fees and interest income from its cardholders. During periods of economic expansion, American Express is well-positioned for success.
Furthermore, American Express is adept at attracting high-earning cardholders. Compared to average earners, high earners are less likely to change their spending habits or default on their payments during minor economic disruptions.
Mastercard
The third compelling Warren Buffett stock that could be the subject of much stock-split conversation in 2025 is none other than payment-processing giant Mastercard (MA 0.19%).
Mastercard has only completed one stock split (10-for-1) since going public in May 2006. However, when Mastercard completed this split in January 2014, its shares were trading above $700. With its shares now well above $500, the stage is set for the company's board to act again.
Like American Express, Mastercard gains significantly from the nonlinearity of the economic cycle. Even though recessions tend to result in reduced spending, which can be challenging for the company, prolonged economic expansions ensure that consumer and corporate spending progressively increase over time.
Mastercard, ranking as the country's second-largest payment processor, distinguishes itself from competitors like American Express in its financing aspect. Unlike AmEx, Mastercard's leadership prioritizes solely on payment facilitation and refrains from lending. The perk of this strategy is that Mastercard doesn't have to maintain capital reserves for covering loan failures or possible late payments. In essence, it recovers from economic slumps more swiftly than the majority of financial sector stocks.
Mastercard's remarkable 12,500% total return (consisting of dividends) since its 2006 initial public offering serves as proof of the vast international prospects it encounters. Most developing nations continue to suffer from underbanking, which creates a door for Mastercard to either organically or through acquisitions, establish a presence in these countries. Moreover, with cross-border payment volume regularly increasing by a double-digit percentage annually, Mastercard is set on the route to enduring double-digit earnings growth.
After observing the trend of stock splits in 2024, investors might be interested in Warren Buffett's portfolio for potential split candidates in 2025. For instance, Domino's Pizza, with its shares hovering in the mid-$400s, might consider a split due to the growing urgency.
In the context of finance and investing, Buffett's Berkshire Hathaway portfolio includes various stocks. One of these, Domino's Pizza, has seen significant growth since its IPO, and its stock price is now high enough to potentially justify a split.
