What's Driving Warren Buffett's Massive Investment In Sirius XM's $8B Market Cap

Warren Buffett is all in on Sirius XM and people are curious why. Let’s break it down with his own words.

First off, it’s not about the recent 1-for-10 reverse stock split. “[Stock splits] change nothing about the underlying business,” Buffett has often reminded folks. So, what’s driving this move?

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Buffett's got a deep understanding of Sirius XM's business. He's no stranger to subscription-based models. “As a former paperboy,” Buffett once said, he’s familiar with how subscription revenue works. Plus, he's a fan of the service. Word on the street is he's particularly fond of the “Siriusly Sinatra” channel. And it’s not just the music; Buffett values companies with strong market positions. Sirius XM? It's got a monopoly on satellite radio in the U.S. and holds a solid spot in the podcast game.

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Then there's the management factor. Buffett famously said, “Our favorite holding period is forever” but only when a company has “outstanding management.” Jennifer Witz, Sirius XM’s CEO, has been with the company since 2002, climbing the ranks to her current role. She’s got the experience and importantly, she's got skin in the game – owning nearly 12.1 million shares. That kind of commitment from leadership is something Buffett respects.

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Finally, it all comes down to price. Buffett learned from Benjamin Graham, the “father of value investing.” He's still a value investor at heart. “I will buy the stock only if its price is attractive relative to the lower end of my estimated earnings range,” Buffett once explained. Sirius XM trades at a forward price-to-earnings ratio of 6.4, one of the cheapest in Berkshire Hathaway’s portfolio. With a price-to-earnings-to-growth (PEG) ratio of 0.64, it's clear why Buffett finds it appealing.

So, why is Buffett buying Sirius XM hand over fist? Simple. He understands the business, trusts the management and thinks the price is right.

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