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Based on Berkshire Hathaway's new stake, Domino's Pizza (DPZ) stock looks attractive to value investors like Warren Buffett. Its huge free cash flow (FCF) and FCF margins may be why. One way to play it is to short out-of-the-money DPZ put options.
DPZ was at $432.89 on Friday, Nov. 15. Warren Buffett's company disclosed yesterday that it had taken a new position of 1.28 million shares in DPZ stock. That works out to roughly 3.7% of its 34.5 million shares outstanding at the end of the quarter.Based on its strong free cash flow (FCF) and FCF margins, DPZ stock could be worth 30% more at $563 per share. This article will explore how shorting out-of-the-money puts is a good way to play this.
