Why Is Warren Buffett Buying This Stock-Split Stock Hand Over Fist?
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Warren Buffett bought only seven stocks for Berkshire Hathaway's portfolio in the second quarter of 2024. He seemed to be especially enthusiastic about Sirius XM Holdings (NASDAQ: SIRI), increasing Berkshire's stake by 262%.
Rest assured that Sirius XM's 1-for-10 reverse stock split conducted earlier this month had nothing to do with Buffett's purchase of more shares. The legendary investor might have liked the related decision to merge Liberty Media's holdings in the company with Sirius XM. However, he knows that stock splits of any shape, form, or fashion change nothing about the underlying business.
So, why is Buffett buying this stock-split stock hand over fist? I think there are three main reasons.
1. He understands Sirius XM's business
Buffett famously shuns investing in businesses that he doesn't understand. He missed out on huge gains in several of today's top tech stocks because their business models weren't in his wheelhouse. However, Buffett no doubt understands Sirius XM's business.
He's said to be a fan of Sirius XM's satellite radio. Reportedly, Buffett especially likes the "Siriusly Sinatra" channel that plays Frank Sinatra music along with other similar crooners, including Tony Bennett and Dean Martin.
Although Sirius XM's business isn't the same as a newspaper's business, there are some distinct similarities -- notably including that they both rely on subscriptions for revenue. As a former paper boy, Buffett definitely knows how subscription models work.
Buffett has also always prized companies with dominant market positions. Sirius XM has a monopoly in the satellite radio business in the U.S. and is a major player in the podcast market.
2. He views management favorably
Many know Buffett once said, "[O]ur favorite holding period is forever." What they often leave out, though, is that he prefaces that remark by saying it applies "when we own portions of outstanding businesses with outstanding managements." I suspect a key reason Buffett has invested so heavily in Sirius XM is that he views its management favorably.
Sirius XM CEO Jennifer Witz joined the company in 2002. She served in several financial and operating positions, including chief marketing officer from August 2017 through March 2019 and president of sales, marketing and operations from March 2019 through December 2020. Witz moved into the CEO role in January 2021. Before working at Sirius XM, she held executive positions at Viacom (now part of Paramount Global) and Metro-Goldwyn-Mayer (now owned by Amazon).