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Sydnee Gatewood
Sydnee Gatewood
Articles (2428) 

Warren Buffett Adds to Liberty SiriusXM

Guru purchased Class A and Class C shares

Warren Buffett (Trades, Portfolio) increased his holding of Liberty SiriusXM Group (NASDAQ:LSXMK)(NASDAQ:LSXMA) on April 24.

The Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) CEO purchased nearly 5 million Class C shares for an average price of $39.95 per share. He bought over 3.09 million Class A shares for $39.96 per share. He now owns a total of 27.2 million Class C shares and 13.2 million Class A shares.

In April 2016, the company recapitalized its existing common stock in order to accommodate investors interested in benefiting from its stake in Sirius XM Holdings Inc. (NASDAQ:SIRI) by issuing tracking stock.

According to the company, “In the recapitalization, each issued and outstanding share of LMC's Series A Common Stock (LMCA) was reclassified and exchanged for: one share of Series A Liberty SiriusXM Common Stock (NASDAQ:LSXMA), 0.25 of a share of Series A Liberty Media Common Stock (LMCA) and 0.1 of a share of Series A Liberty Braves Common Stock (NASDAQ:BATRA).”

The same structure was applied for Class B (NASDAQ:LSXMB) and Class C shares.

Having established his positions in second-quarter 2016, Buffett has gained an estimated 24% for his investment in Class C shares and 22% for his Class A shares.

Liberty SiriusXM provides a subscription-based satellite radio service that streams commercial-free music, sports, news, talk, entertainment, traffic and weather. The company has a market cap of $13.2 billion and an enterprise value of $26.6 billion. Its Class A shares were trading around $41.18 on Tuesday with a price-earnings (P/E) ratio of 36.8, a price-book (P/B) ratio of 1.2 and a price-sales (P/S) ratio of 2.6. Its Class C shares were trading around $41.06.

The Peter Lynch chart below shows the stock is trading about evenly with its fair value.

1493130438643.png

GuruFocus ranked the company’s financial strength 5 of 10. The Piotroski F-Score of 8 suggests the company has a strong business condition. The Altman Z-Score of 1.2 indicates the company is under some financial stress. The cash-debt ratio of 0.07 and interest coverage ratio of 4.8 suggest the company is not able to adequately cover its debt and interest expenses.

Liberty SiriusXM’s profitability and growth was ranked 9 of 10 by GuruFocus. It has an operating margin of 32.8% and a net margin of 12.9%. The return on equity (ROE) underperforms 54% of companies in the global broadcasting-radio industry. In contrast, the return on assets (ROA) and return on capital (ROC) outperform 53% and 85% of competitors. Over the past three years, the company has grown its revenue at a rate of 12% per year.

The company does not pay a dividend.

Buffett is Liberty SiriusXM’s largest shareholder among the gurus. He holds 8.12% of the company’s outstanding Class C shares and 3.92% of its outstanding Class A shares. Eight other gurus hold Class A shares and 11 other gurus hold Class C shares.

Disclosure: I do not own any stocks mentioned in the article.

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About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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