If you doubted the genius of Warren Buffett and his company Berkshire Hathaway in 2024, you certainly aren't doubting it now. While investors continued to pour into stocks last year and take advantage of frothy market conditions, Buffett and his team remained patient and cautious, buying very few stocks and hoarding cash. This year, the broader market benchmark S&P 500 index is down over 3% (as of March 27), while Berkshire's stock has rocketed nearly 18%, as investors appear to view the company's diversity of businesses, massive cash pile, and experienced management team as the place to be when uncertainty clouds the market.
Last year, Berkshire piled into a stock that has not only struggled immensely, but that the majority of Wall Street analysts are telling investors to sell. That stock is now soundly beating the market so far this year. Is Buffett starting to make his move?
Blocking out the noise
Berkshire first gained exposure to the large digital audio company Sirius XM (SIRI +0.77%) when it bought shares tracking Liberty Media in 2016. In early 2024, Berkshire purchased shares tracking Sirius ahead of the company's split from Liberty and then reverse stock split in September 2024. Since this move, Berkshire has continued to increase its position.
While the bull market raged for more than two years, shares of Sirius continued to struggle and are now down about 38% over the last year. The satellite radio operator and owner of the music streaming platform Pandora has struggled in the face of intense competition such as music streaming companies like Spotify, despite Sirius being the only licensed satellite radio operator in the U.S.
The majority of Wall Street analysts have told investors to sell Sirius, citing the company's weak financial guidance for the upcoming year and potential challenges in growing its subscribers. But Sirius has started to see its fortunes change and is now up about 7.4% on the year.
NASDAQ: SIRI
Key Data Points
Buffett has yet to discuss Sirius, and many believe that one of Buffett's top investing lieutenants, Ted Weschler, is deeply involved in the position. At its investor day last September, Sirius discussed its long-term targets of adding 10 million subscribers to reach 50 million, while growing free cash flow by 50% to $1.8 billion. The company plans to do this with a new in-vehicle technology platform, new pricing and subscription offerings, expansion of its podcast network, and introduction of new ad-supported plans and premium features.
The company was off to a good start this year when it reported fourth-quarter earnings and revenue that beat consensus estimates. The results also showed stabilizing subscription trends and less churn, while the company continues to streamline its operations by reducing expenses.
Is Berkshire's bet starting to pan out?
Berkshire has built its position in Sirius to roughly 1% of its total roughly $290 billion equities portfolio and it's the company's 16th largest position, so while Sirius is not Berkshire's most important holding, it certainly holds some relevance in the portfolio.
Sirius' turnaround plan still appears to be in the early innings, and the company has much to prove. Investors should keep in mind that both analysts and Buffett can be right on a stock like this. Most Wall Street analysts are catering to hedge funds and other institutional investors that invest on a 12- to 18-month horizon. Meanwhile, you've likely heard Buffett say that he likes to buy stocks he can hold forever.
Sirius trades at less than 8 times forward earnings. It's a stock that will certainly require patience, but the company also pays a nearly 4.5% dividend yield, so investors will be well compensated for their time.
