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Here’s the 1 Stock We Know for Certain Warren Buffett and Berkshire Hathaway Are Buying
Warren Buffett hasn’t seen a lot to like in the stock market lately.
The Oracle of Omaha has sold more stocks than he bought in each of the last seven quarters reported by Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). That includes a massive sale of around $75 billion worth of Apple stock in the second quarter and over $10 billion in Bank of America shares over the last three months. That pattern makes it likely the third quarter was the eighth straight quarter of net sales for Buffett and his team of portfolio managers.
But Buffett (or one of his fellow managers) is buying at least one stock for Berkshire Hathaway shareholders based on required filings with the SEC.
Buffett’s typical buying behavior has changed
Over the last few years, Buffett had some predictable stock purchases, but even those might not be so reliable in today’s market.
Despite reducing or selling out his exposure to equities in Berkshire’s portfolio, Buffett could be counted on to repurchase shares of Berkshire Hathaway over the last six years. But share buybacks may be less appealing at Berkshire’s current price, which has climbed 30% year to date.
Buffett didn’t buy back a single share in June, and the stock has consistently traded higher in the third quarter. That could lead to the first quarter where Buffett didn’t buy back a single share since the board of directors changed the repurchase authorization in mid-2018. Investors will have to wait until Berkshire’s Q3 earnings report in early November to know for certain.
Buffett has also given the cold shoulder to another stock he’s consistently bought over the last few years. Any time Occidental Petroleum saw its share price dip below $60 per share, investors could reasonably expect a filing showing Berkshire Hathaway had purchased more of its common stock. Despite plunging oil prices in Q3 leading to a two-year low stock price for Occidental, those SEC filings never materialized.
It could be that Buffett is content with a 27.3% stake in the company at this point. He mentioned that he has no interest in taking a controlling stake of Occidental, and he praised CEO Vicki Hollub on multiple occasions, indicating he believes his investment is in good hands.
Just one SEC filing since the end of June showed that Berkshire added to an existing position. In October, Berkshire Hathaway bought $87 million worth of Sirius XM (NASDAQ: SIRI) shares.
Berkshire now owns a huge portion of this company
Berkshire Hathaway had previously owned shares of Sirius XM, but it started acquiring its stake in the company in earnest late last year. The vast majority of the stake was acquired through a position in the Liberty SiriusXM tracking stock, which aimed to track Liberty Media’s stake in the satellite radio operator. The two stocks merged earlier this year, leaving Berkshire Hathaway with over 30% of the total outstanding shares.
Sirius XM is the only satellite radio operator in the United States. Unlike terrestrial radio, Sirius XM makes the bulk of its revenue from subscriptions instead of advertising. Its method for attracting new subscribers primarily relies on free trials with new car purchases. Over the years, it’s managed to attract about 33 million paid subscribers, and it counted 7.4 million free-trial listeners as of the end of the second quarter.
Its free-trial strategy and focus on exclusive content takes care of much of the marketing Sirius XM needs, which helps it keep operating expenses low. On top of that, Sirius XM benefits from lower music royalty rates than on-demand streaming services, paying just 15.5% of gross revenue for music licenses. On-demand streaming pays about twice as much.
As a result, Sirius XM produces steadily rising operating profits as its subscriber base grows. While its subscriber base has stagnated recently, the company remains nicely profitable.
There’s no indication that Sirius XM is facing a mass exodus of subscribers, but the stock appears to be trading as such. Shares are currently priced at just over 8 times analysts’ estimates for 2025 earnings. Its enterprise value is just 6.8 times management’s forecast for 2024 EBITDA.
With shares trading at such a low valuation and Sirius XM’s simple-to-understand business model, it’s a prototypical Warren Buffett investment.
A warning from Buffett
As of this writing, Sirius XM is the only stock we know for certain that Buffett and his team bought in recent months. That speaks to a broader warning from Buffett about the current stock market.
Sirius XM is a relatively small company with a market cap just over $9 billion. That won’t really move the needle for Berkshire Hathaway (and its nearly $1 trillion market cap), even if it acquires the entire company.
But Buffett hasn’t found much else to put Berkshire’s cash toward. The bigger companies that could move the needle likely aren’t attractive right now (in Buffett’s eyes) from a valuation standpoint, which explains why he’s been a net seller of stocks.
But for everyday investors, i.e. 99.99% of the world, there are a ton of opportunities. Sirius XM may be just one of many small- and mid-cap stocks investors should look to add to their portfolios in the current market.
Should you invest $1,000 in Sirius XM right now?
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Adam Levy has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
Here’s the 1 Stock We Know for Certain Warren Buffett and Berkshire Hathaway Are Buying was originally published by The Motley Fool
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
CryptoCurrency
The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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