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Warren Buffett’s considered to be one of the best stock market investors alive today. And so whenever he and his team at Berkshire Hathaway start buying shares, investors often pay attention.
Rich US stock valuations certainly help explain why the ‘Oracle of Omaha’ is trimming down most of his positions in 2025. Yet that hasn’t been the case with Sirius XM Holdings (NASDAQ:SIRI). In fact, he’s been busy steadily, increasing his stake since late 2024, growing the position to around $2.6bn.
With the share price down almost 30% in the last 12 months, could this be a hidden value opportunity?
Why Buffett’s buying
As a quick reminder, Sirius XM is a radio and audio streaming service provider operating across the US and Canada. Using satellite signals, it supports over 250 audio channels streaming music, sports and talk shows, among others. It’s a classic boring business that most investors have seemingly been ignoring. And while we don’t know the exact investment thesis, the company does have several favourable traits that Buffett likes.
First off, after the recent tumble, the valuation now looks quite attractive with a price-to-earnings ratio of just 7.3. That’s despite the fact that the company has a long track record of generating strong free cash flow and consistent dividends that have been rising since 2016.
What’s more, despite competitive pressures from platforms like Spotify, Sirius has proven to be quite durable, especially in rural areas where a reliable mobile signal is uncommon. And this resilience has only been compounded by the firm’s exclusive content and content partnerships.
This all points to a competitive moat that most investors seem to be underestimating. With that in mind, it’s not so surprising to see Buffett load up on shares while everyone else is seemingly selling.
No guarantees
Seeing Buffett invest in a business is certainly a strong signal of confidence. However, it’s important to remember that he isn’t perfect and has made plenty of mistakes over the years. Therefore, blindly following in his footsteps likely isn’t a prudent strategy.
Instead, investors need to understand the risk of this investment. And while Sirius has a lot of promising traits, the firm still has its weak spots.
Growth in the group’s subscriber base has slowed recently. This may be as a result of a wider cyclical slowdown or consumers simply losing interest in the shows available on its satellite-powered platform. And there‘s growing concern that customer attrition could accelerate as some of its long-standing exclusive programming comes to an end, as older talent starts to retire.
At the same time, the balance sheet holds close to $10.2bn in debt & equivalents versus only $92m in cash & equivalents. To be fair, with operating cash flows of $1.7bn in 2024, the company’s comfortably covering both its interest and dividend expenses. But that could change if more listeners start switching to competing platforms.
The bottom line
All things considered, Sirius XM appears to be a promising value opportunity. But that value’s entirely dependent on management’s ability to attract and retain an audience. And right now, it’s unclear whether it can succeed on this front. That’s why I’m not following Buffett on this one.
