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Warren Buffett’s firm Berkshire Hathaway recently made some surprising adjustments to its investment portfolio. The decisions are likely a strategic response to the current market turmoil in the US.
However, some of them have analysts confused.
In the third quarter of 2024, the investment giant significantly reduced its holdings in Apple, selling over 600m shares. Despite this, the stock remains Berkshire’s largest holding, with the remaining stake worth approximately $70bn.
It also cut its stake in Bank of America to below 10%, adding to the firm’s growing stockpile of cash.
With the US stock market experiencing increasing volatility, Buffett seems to have adopted a cautious investment approach. That’s not surprising, considering the so-called ‘Buffett Indicator’ is near all-time highs.
The indicator compares the total market capitalisation to GDP in the US. It’s currently above 200%, suggesting the market’s significantly overvalued. This is likely the key reason behind what appears to be a shift in strategy for the ‘Oracle of Omaha’.
An odd purchase
It’s not all about selling at Berkshire. Some of the recent capital from sales went towards building a notable position in satellite broadcasting company Sirius XM (NASDAQ: SIRI).
Between late January and early February, Berkshire purchased an additional 2.3m shares in the company, bringing its ownership to over 35.4%. This investment suggests strong confidence in the satellite communications sector, despite declining interest from consumers.
Aside from its core service, Sirius XM also operates Pandora music streaming. This makes it a key competitor to Spotify and Apple Music. At one point it was a leader in the sector, commanding over 70% of the online music market in 2013.
But the service has reportedly been losing two-to-three million listeners a year. The stock fell 58% in 2024 and isn’t highly favoured on Wall Street, with few analysts giving it a Buy rating.
So what is behind the sudden interest from Berkshire Hathaway?
Long-term potential?
As a value-focused investment firm, it may see potential in the company’s low valuation. Recently, it’s begun adding exclusive content and expanding its streaming services in an attempt to recover market share. It’s possible these developments prompted Berkshire to consider the company’s long-term potential.
However, as it has yet to comment on the purchase, we can only speculate on the reason.
For now, Spotify, Apple and Amazon collectively account for over 90% of US music streaming subscribers. Any competitor has a tough road ahead if it hopes to make a dent in that dominance.
After posting a $1.67bn loss in its latest full-year results, Sirius XM needs all the help it can get. Earnings have recovered somewhat after a disastrous Q3 last year but they’re expected to remain flat at 66c per share in Q1 2025.
Overall, I don’t see the attraction. Yes, the shares seem undervalued right now but I don’t see a strong argument for a recovery. As such, it isn’t high on my list of stocks to consider right now.
However, I’m not one to question the genius of Buffett and his team at Berkshire. There’s a strong possibility I’ll be proven wrong.
