Warren Buffett's Berkshire Hathaway has long held a position in VeriSign (VRSN 2.19%). The company first began acquiring shares in 2012. It made the bulk of its purchases from 2012 to 2014 but had periodically trimmed its position until late last year, when it suddenly began repurchasing shares in December.
Berkshire has earned massive gains in the stock in its 13-year history of holding shares, but the sudden resurgence in interest comes as a surprise. Given this activity, should investors follow the lead of Buffett's team and buy shares or remain on the sidelines?
What drew Buffett's team to VeriSign
VeriSign operates two businesses. Its naming-services enterprise sells and manages internet domain names. Its other segment, network intelligence and availability services (NIA), monitors and manages internet traffic and performs cybersecurity services.
This might be more of a "Warren Buffett investment" than it appears. VeriSign provides critical infrastructure and security services at high profit margins, making it the type of "forever" business that has attracted Buffett throughout most of his career.
Since the beginning of 2012, when Buffett's team first started buying, VeriSign is up by just under 600%. This means it has outperformed the S&P 500 for most of that history and continues to do so.
VRSN Total Return Level data by YCharts.
Why more buying now?
Despite that performance, VeriSign fell significantly in 2022 as investors sold tech stocks en masse, and the stock remained in a trading range until late 2024. However, in late 2024, Buffett's team bought just over 450,000 shares.
This timing was fortuitous. Since Berkshire began buying shares on Dec. 17, VeriSign stock has risen by more than 25%. Since the most recent 13-F filing only covers purchases through Dec. 31, we don't know whether the buying continued into the first quarter of 2025.
NASDAQ: VRSN
Key Data Points
Regardless of whether Buffett's team is still adding shares, Berkshire is in a unique position financially. Its $334 billion in liquidity leaves it with fewer big opportunities to easily deploy such a massive amount of cash. For now, Berkshire is VeriSign's largest shareholder, and with VeriSign's market cap of just under $24 billion, Berkshire could buy the tech company and take it private.
It remains to be seen whether a buyout is in Berkshire's plans, and it's not clear if average investors should follow Buffett's team into VeriSign. Growth has slowed to a crawl as its $1.56 billion in revenue in 2024 grew by only 4% from the prior year. While operating income rose, the company's 2024 net income fell to $786 million from $818 million a year earlier amid a growing income tax burden.
Furthermore, VeriSign's price-to-earnings ratio (P/E) of 31 may seem expensive, considering the company's prospects for slow growth, and its price-to-sales ratio (P/S) of 16 confirms that it isn't a cheap stock. Such multiples may deter investors from buying VeriSign shares at current levels.
Should investors follow Buffett's lead with VeriSign?
Given VeriSign's current conditions, investors should probably refrain from adding the company's shares to their portfolios. Berkshire's VeriSign buying spree early in the past decade probably profited Buffett and his shareholders significantly. Also, it appears to have added shares late last year as the tech stock was surging.
Yet, VeriSign has become a slow-growth stock with a relatively expensive valuation. Berkshire is VeriSign's largest shareholder, and its more recent interest may have more to do with a possible buyout of the company or, at the very least, a way to put some of its massive cash hoard to work.
Ultimately, VeriSign may continue to drive returns for current shareholders. Still, when considering the company's growth rate and valuation, investors can probably find stocks with more potential for strong returns than VeriSign offers today.
