So far in 2026, the stock market has delivered another strong year. The S&P 500’s up 9.1% since January (including dividends), and investor confidence still looks fairly robust.
But June’s been a different story. In the space of just a few days, the flagship US index dropped almost 5% as strong jobs data raised fears of Federal Reserve rate hikes, and geopolitical tensions in the Middle East reignited. And while the index did bounce back, it once again stumbled a few days later.
This sort of daily volatility is a normal part of an investor’s journey. But in a world feeling increasingly unstable and valuations getting stretched, could it be an early warning sign of cracks starting to emerge? And if so, what would legendary billionaire investor Warren Buffett do?
Buffett’s playbook in a frothy market
Buffett’s approach to elevated markets is well documented. When prices are high across the board, he narrows his focus. He looks for quality businesses that have been temporarily sold off for reasons that don’t reflect long-term value.
That’s precisely what he did during the last frothy period of the market.
Between the third quarter of 2024 and the final quarter of 2025, while trimming a number of his positions and accumulating a record cash pile, Buffett made one notable exception.
He bought shares in Domino’s Pizza (NASDAQ:DPZ) for six consecutive quarters, building a 9.9% stake worth over $1.4bn.
The reasoning was textbook Buffett. Domino’s had sold off sharply after cutting its international store opening guidance triggered by a short-term operational hiccup.
And seeing that the underlying business was untouched, Buffett swiftly took advantage of a sudden dip in the share price.
Why Domino’s might still make sense
Looking at Domino’s first-quarter results for 2026, the numbers were admittedly mixed. US same-store sales rose just 0.9%, missing analyst expectations of 2.7%.
And internationally, same-store sales also fell short, weighed down by a tougher consumer backdrop and more aggressive competitor promotions.
But step back from the short-term noise, and the long-term picture remains compelling.
Domino’s continues to generate nearly $500m of annual free cash flow, has raised its dividend for over a decade, and has expanded its addressable market significantly by partnering with both Uber Eats and DoorDash.
So could Domino’s secretly be a top stock to consider right now?
Is there anything to worry about?
The near-term headwinds are real. Competitor promotions are intensifying across the quick-service restaurant sector. And that’s squeezing Domino’s pricing power at exactly the moment when consumers are feeling financially stretched.
The stock market backdrop also matters. While investors are seemingly still quite bullish, if that were to flip into a risk-off environment, even high-quality consumer staples can face valuation pressure as investors rotate to cash and bonds.
So what’s the verdict?
Domino’s is precisely the kind of business Buffett has spent 60 years searching for: durable brand, asset-light model, predictable cash flows, and a valuation that, even today, sits at a meaningful discount to its five-year historical average.
That doesn’t mean the shares can’t fall further. They certainly can given the group’s short-term challenges. But with most investors seemingly writing this business off, it could prove to be an overlooked and potentially lucrative opportunity.
That’s why I think Domino’s shares are worth mulling.
Should you invest £5,000 in Domino's Pizza right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Domino's Pizza made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
