Those looking to chart a successful course as investors could do worse than emulating the strategy of legendary Berkshire Hathaway CEO Warren Buffett, who is arguably one of the greatest investors of all time. Since taking charge of the company back in 1965, the so-called "Oracle of Omaha" has amassed an unrivaled track record, as his stock picks have yielded compound annual gains of roughly 20% and have collectively soared a massive 4,384,748%.
While many investors focus on the largest stakes in Berkshire's equity portfolio, a few of the more modest positions have a great deal more upside, according to Wall Street. In fact, three of those stocks could gain between 104% and 157% according to certain Wall Street analysts.
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Sirius XM Holdings: Implied upside of 157%
Sirius XM Holdings (SIRI +0.00%) is the largest provider of satellite radio services in the U.S. Sirius XM and the company's ad-supported Pandora music streaming service have a combined audience of 34 million paid subscribers and 150 million listeners, giving it unmatched reach in North America. It's such a small part of Buffett's holdings it's barely more than a footnote in Berkshire's $313 billion stock portfolio, at just under $142 million.
The stock has been cut in half in 2024 alone, and while business has been tough, some on Wall Street believe the selling has simply gone too far. Sirius XM's results seem to support that view.
In the first quarter, revenue of $2.16 billion was up 1% year over year, while earnings per share (EPS) of $0.07 climbed 17%. SiriusXM reported record ad revenue thanks to the ongoing rebound in the advertising market. The company suffered from higher churn as paid subscribers declined nearly 2%, partially offset by average revenue per subscriber (ARPU), which was marginally higher. This isn't at all surprising, considering the state of inflation, as consumers continue to make tough choices in the grocery aisle and at the gas pump.
Despite a stock price slump of 33% over the past year, some on Wall Street remain remarkably bullish on Sirius XM. Benchmark analyst Matthew Harrigan maintained a buy rating on the shares with a price target of $6.50. That represents potential upside of 157% compared to Monday's closing price.
The analyst cites a disconnect ahead of its Q3 merger with Liberty Sirius XM and the benefits arising from management's "gaggle of strategic initiatives."
Finally, at just 8 times trailing earnings, investors have almost no growth factored into the current share price. Even a minor acceleration in Sirius XM's growth rate could send the stock higher.
NASDAQ: SIRI
Key Data Points
Charter Communications: Implied upside of 139%
Charter Communications (CHTR 1.01%) provides broadband internet, cable, and wireless phone services to residential and small and medium-sized business customers in the U.S. It's the type of boring, predictable business with reliable cash flows that Buffett is famous for. The company serves roughly 32 million customers and represents a relatively inconsequential $1.1 billion stake in Berkshire's portfolio.
In the first quarter, revenue of $13.7 billion edged 0.2% higher year over year, weighed down by the end of the federal Affordable Connectivity Program (ACP). However, despite the flat revenue growth, EPS of $7.66 grew an impressive 14%. With these federal subsidies ended, Charter's business will likely improve once inflation begins to subside.
Investor fears have driven the stock lower, down 16% over the past year, but some on Wall Street remain unfazed. MoffettNathanson analyst Craig Moffett maintains a buy rating and $660 price target on Charter stock, which represents potential upside for investors of 139% compared to Monday's closing price.
The analyst acknowledges the need for the broadband business to stabilize but says: "We've long argued that Charter doesn't need to show 'broadband reacceleration.' They merely need to show that broadband unit results are predictable enough ... to allow for focus on all the other good things ... (wireless, ARPU growth, margins)."
Finally, at just 9 times trailing earnings, Charter is dirt cheap and has loads of potential upside.
NASDAQ: CHTR
Key Data Points
Liberty Latin America: Implied upside of 104%
Liberty Latin America (LILA +0.49%) (LILA.K +0.48%) isn't a household name in the U.S., but it's one of the leading telecommunications companies serving Latin America, Puerto Rico, and the Caribbean. Like Charter Communications, its business is boring, predictable, and reliable. It also represents a minuscule portion of Buffett's holdings, worth a measly $27 million.
In the first quarter, Liberty Latin America's revenue of $1.1 billion was relatively flat year over year as the company focused on the final stages of migrating its customer platform in Puerto Rico. At the same time, its operating income of $93 million slid 13%. However, while sentiment has been dreary, Liberty has been buying back shares hand over fist. In the first quarter alone, the company repurchased 9 million shares or roughly 5% of its outstanding stock.
Despite its recent slump, some Wall Street analysts are pounding the table for Liberty Latin America. Pivotal Research analyst Jeffrey Wlodarczak maintained a buy rating on the shares while increasing his price target to $18. That represents potential upside of 104% compared to Monday's closing price.
The analyst cited the company's better-than-expected revenue and the wireless subscriber conversion of the customers in Puerto Rico acquired from AT&T. Wlodarczak is also bullish on the "material acceleration" in stock buybacks, which will improve per-share profits going forward.
Finally, at just 9 times trailing earnings, investors are getting Liberty Latin America stock for a song in advance of the likely stock price rebound to come.
