Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) revealed over the weekend it boosted its stake in Liberty SiriusXM Group (LSXMK, Financial) by 14.23%.
The legendary guru, who leads the Omaha, Nebraska-based insurance conglomerate, follows a long-term value investing approach that focuses on companies that have understandable business models, favorable long-term prospects and competent management teams that are available at attractive prices.
According to GuruFocus Real-Time Picks, a Premium feature, Berkshire invested in 4.39 million shares of the Series C tracking stock on May 29, impacting the equity portfolio by 0.09%. It now owns a total of 35.2 million shares. The stock traded for an average price of $36.15 on the day of the transaction.
GuruFocus estimates Buffett has gained 7.29% on the investment since the second quarter of 2016, when Liberty Media recapitalized its existing common stock in order to accommodate investors interested in benefiting from its stake in Sirius XM Holdings Inc. (SIRI, Financial).
The Englewood, Colorado-based diversified media company, which has a large interest in subscription-based satellite radio service Sirius XM and several other businesses, has a $12.88 billion market cap; its Series C shares were trading around $37.10 on Monday with a price-earnings ratio of 18.29, a price-book ratio of 1.09 and a price-sales ratio of 1.48.
The Peter Lynch chart shows the stock is trading slightly above its fair value, suggesting it is overpriced.
GuruFocus rated Liberty SiriusXM’s financial strength 3 out of 10. As a result of issuing approximately $2.5 billion in new long-term debt over the past three years, the company has low interest coverage, which means it may have trouble covering its interest expenses. The Altman Z-Score of 0.88 warns the company could be at risk of going bankrupt. Similarly, the company may struggle with poor profitability since the weighted average cost of capital is higher than the return on invested capital.
The company’s profitability fared better with a 7 out of 10 rating, driven by strong margins and returns that outperform a majority of competitors and a high Piotroski F-Score of 7, which suggests operating conditions are healthy.
Buffett is Liberty SiriusXM’s largest guru shareholder with an 11.24% stake. Wallace Weitz (Trades, Portfolio), Seth Klarman (Trades, Portfolio), Ron Baron (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Mario Gabelli (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) also have positions in the stock.
Portfolio composition
Valued at $175.53 billion, the equity portfolio consisted of 50 stocks as of March 31. A majority of the portfolio was invested in financial services stocks at 37%, while the technology sector has a weight of 37.01% and the consumer defensive space represents 15.74%.
Buffett’s five largest holdings as of the end of the quarter, accounting for over half of the portfolio, were Apple Inc. (AAPL, Financial), Bank of America Corp. (BAC, Financial), The Coca-Cola Co. (KO, Financial), American Express Co. (AXP, Financial) and Wells Fargo & Co. (WFC, Financial).
Disclosure: No positions.
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