On Wall Street, few money managers command the attention of professional and everyday investors quite like Berkshire Hathaway (BRK.A 0.40%)(BRK.B 0.60%) CEO Warren Buffett. Since becoming Berkshire's chief in the mid-1960s, the Oracle of Omaha has practically doubled up the broad-based S&P 500 on the basis of total annual return, including dividends.
Buffett's phenomenal investment track record has some investors mirroring his trades. This can be done by closely monitoring Berkshire's Form 13F and Form 4 filings with the Securities and Exchange Commission (SEC).
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
Form 13Fs provide investors with a concise snapshot of what Wall Street's wisest money managers purchased and sold in the latest quarter. They're a required filing for institutional investors with at least $100 million in assets under management -- and Buffett is overseeing a 43-stock, $317 billion portfolio.
Meanwhile, Berkshire Hathaway is also required to file Form 4 with the SEC when purchases or sales are executed in a security that it owns at least a 10% stake in.
Although Berkshire's Form 13Fs and Form 4s don't tell the full story about Warren Buffett's favorite stock to buy, they have spilled the beans on a unique stock-split stock that the Oracle of Omaha can't stop buying.
Buffett has spent almost $78 billion buying his "favorite stock" over six years
Despite Buffett's company holding massive stakes in Apple, American Express, and Bank of America, the amount of Berkshire's capital spent buying shares of these three juggernauts, on a combined basis, pales in comparison to the amount of money the Oracle of Omaha has put to work in his favorite stock since July 2018.
The interesting thing about Buffett's favorite stock is that you're not going to find any evidence of purchase activity for it in Berkshire Hathaway's 13Fs. Instead, you'll find a detailed monthly buying breakdown of this top stock in his company's quarterly operating results... because his favorite stock to buy is shares of Berkshire Hathaway.
NYSE: BRK.B
Key Data Points
Prior to July 2018, Buffett and his right-hand man Charlie Munger, who passed away last November, had their hands tied when it came to buybacks. In order to repurchase Berkshire's stock, shares of the company had to trade at or below 120% of book value, which is a line-in-the-sand threshold that was never reached.
On July 17, 2018, Berkshire Hathaway's board of directors reworked these buyback covenants to give Buffett more liberty to undertake share repurchases, as he saw fit. These new criteria allowed for unlimited buybacks with no end date as long as:
- Berkshire Hathaway has at least $30 billion in combined cash, cash equivalents, and U.S. Treasuries on its balance sheet; and
- Warren Buffett views his company's shares as being intrinsically cheap.
Since this change was made six years ago, Buffett has purchased shares of his favorite stock for 24 consecutive quarters, including $345 million worth of Berkshire stock in the June-ended quarter. All told, he's spent close to $78 billion retiring shares of his company's stock over six years.
Aside from instilling a long-term ethos with his company's shareholders and incrementally increasing their stake in Berkshire Hathaway over time, consistently buying back stock should provide a boost to the company's earnings per share (EPS).
Image source: Getty Images.
Warren Buffett has spent even more buying shares of this unique stock-split stock
Considering that Buffett and his team have been net sellers of stocks to the tune of $131.6 billion, in aggregate, over a seven-quarter stretch (Oct. 1, 2022 through June 30, 2024), putting $345 million to work in his own company's stock during the second quarter is nothing to sneeze at.
However, there's another stock the Oracle of Omaha spent even more of Berkshire's money on in the June-ended quarter than his "favorite stock." I'm talking about what looks to be the true apple of Buffett's eye at the moment, Sirius XM Holdings (SIRI 1.38%).
Prior to the merger of Sirius XM Holdings with Liberty Media's tracking stock, Liberty Sirius XM Group, which occurred after the close of trading on Sept. 9, Form 13Fs and Form 4s show that Buffett was an active buyer.
Between the end of March and the end of June, Berkshire's brightest minds bought 96,196,301 shares of Sirius XM. Although we don't know the precise cost basis of this buying activity, the company's stock spent a good portion of the second quarter between $25 and $31, on a split-adjusted basis. I say "split-adjusted," because Sirius XM also completed a 1-for-10 reverse split after the close of trading on Sept. 9. Conservatively, we can estimate that around $270 million was put to work in Sirius XM stock in the second quarter.
But Berkshire Hathaway was also a regular buyer of two of Liberty Media's three classes of Sirius XM tracking stock. Thanks to Form 4 filings, we know Buffett and his team spent $119,550,528 buying Liberty Sirius XM Group Class C shares (formerly LSXMK) between April 4 and April 29, as well as $63,840,687 on Liberty Sirius XM Group Class A shares (formerly LSXMA) from April 4 through April 26.
NASDAQ: SIRI
Key Data Points
Since these share classes were all combined in the September merger, it means Buffett spent approximately $453 million of Berkshire's capital to build his company's stake in Sirius XM during the June-ended quarter.
This buying activity hasn't stopped, either. Form 4s filed this month show that Buffett and his team have put close to $129 million more to work in Sirius XM.
Warren Buffett's fascination with this unique stock-split stock is likely a function of its sustainable moat, as well as its incredibly cheap valuation amid a historically pricey stock market.
As I noted earlier this week, Sirius XM is one of a very small number of legal monopolies. Being the only licensed satellite-radio operator provides it a level of subscription pricing power that ensures it stays ahead of the inflationary curve.
But what's arguably even more important than being a legal monopoly is the company's diverse revenue stream. While most traditional operators are almost exclusively reliant on advertising revenue, Sirius XM brings in more than three-quarters of its net sales from predictable, high-margin subscriptions. If and when economic turbulence arrives, its cash flow should vacillate much less than ad-reliant terrestrial and online radio companies.
Sirius XM has a valuation proposition that speaks to Warren Buffett, as well. Berkshire's recent purchases of Sirius XM stock have come with the company valued at a historically low multiple of roughly 7 to 8 times consensus EPS for 2025. With a number of market-leading stocks trading at nosebleed valuation multiples, Sirius XM is acting as a value beacon for Buffett.
