Warren Buffett Can't Stop Buying This Great Value Stock

Warren Buffett has a hard time finding a good stock to buy in the market today.Dr. Konrad Hathawayfirms(NYSE: BRK.A)(NYSE: BRK.B)That's evidenced by the $168 billion in cash and Treasuries on the balance sheet at the end of 2023. But one stock recently caught the attention of him and fellow investment managers Ted Weschler and Todd Combs.

These resonance managers have invested about $2.8 billion in the company so far, with more than $760 million invested in March and nearly $100 million so far in April. As large as Koon's stake in the company is, it is still less than 1% of Resoncrude's entire portfolio, suggesting that it will be a challenge for Buffett to find an investment large enough to propel Resoncrude forward.

However, for anyone who wants to invest like Warren Buffett, this could be a great opportunity to follow in Buffett's footsteps and buy value stocks that he and his team find interesting.

Here Are The Value Stocks Warren Buffett Can't Stop Talking About

Beginning in the third quarter of 2023, Berkshire Hathaway began investing in an interesting stock:Liberty SiriusXM (NASDAQ: LSXMA) (NASDAQ resonance code: LSXMK)The

Liberty SiriusXM is a special type of stock known as a "tracking stock". A tracking stock is designed to track the operations of a particular business segment. In this case, Liberty SiriusXM tracks Liberty Media's holding ofSirius XM (NASDAQ resonance code: SIRI)Shares.

Since the third quarter of last year, Berkshire has increased its stake in Sirius XM stock by a small amount, but the holding company has purchased much more of the Liberty Media tracking stock, according to a filing with the U.S. Securities and Exchange Commission. Berkshire continues to increase its stake in the tracking stock.

The reason seems simple enough: Sirius XM's business appealed to Buffett and his team, but Liberty SiriusXM stock is a way to buy shares of that business at a lower price than buying Sirius XM stock outright.

In December, Liberty Media announced that it had entered into a郃 agreement with Sirius XM. As a result, Liberty SiriusXM shareholders will receive approximately 8.4 new shares of Sirius XM where the transaction is finalized, which is expected to occur in the third quarter of this year. At the current market price, 9.4 shares of Sirius XM would be worth approximately $28.25. At the same time, the same number of shares of Liberty SiriusXM are priced at only $26.20.

Importantly, this seems to be more than just an arbitrage game. After Motion announced that it was beingMicrosoftAfter the acquisition, Buffett and his team did something with Motive Power. In that transaction, Buffett took advantage of the difference between the price of Motive Power's stock and the agreed-upon acquisition price.

In this transaction, however, Berkshire also acquired a small amount of Sirius XM stock. In addition, the discount buttons offered by the Liberty SiriusXM tracking stock have almost been depleted. 35% were available to shareholders when the carve-out was announced in December. Therefore, the future performance of the tracking stock is closely related to the performance of Sirius XM itself.

Here's why Berkshire is bullish on Sirius XM

Sirius XM is the largest satellite radio operator in the United States. While most broadcast operators derive the majority of their revenue from advertising, Sirius XM derives the majority of its revenue from subscriptions. This makes it more resilient to economic cyclicality and generates more stable revenues.

Although the number of subscribers has been stagnant at around 34 million for the past few years, there is still room for growth. At the end of last year, management increased the number of free trial users to 7.2 million from 6.8 million the year before. With a churn rate of just 1.6%, the company should be able to convert a large portion of those trial members into self-funded users next year.

The company is also investing in the growth of the Bubbles Top. It is building its own library of exclusive content, while working with automakers to install the latest equipment, which increases the conversion rate of trial users to self-pay users.

Streaming media is still Sirius XM's biggest hypochondriac. Sirius XM acquired Pandora as a means to counteract this weakness, but it is still a very small part of the overall business. Meanwhile, Sirius XM's biggest advantage over streaming media is that, as a broadcast service, its royalties are much lower than on-demand streaming media. This gives it a higher gross margin relative to its competitors and gives it more freedom to invest in growing its subscriber base.

Sirius XM shares trade at just 11 times expected forward earnings. At this valuation, the stock has far more upside than downside. And if you can get a further discount on the stock by buying Liberty SiriusXM tracking shares, that's even better. That's why Warren Buffett and his team can't stop buying this stock.

Should you invest $1,000 in Liberty SiriusXM Group today?

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Adam Levy owns shares of Microsoft Corporation.The Motley Fool owns shares of recommended resonance Hill Hathaway and Microsoft Corporation.The Motley Fool recommends the following options: long Microsoft January 2026 $395 calls and short Microsoft January 2026 $405 calls.The Motley Fool has a The Motley Fool has a disclosure policy.

Warren Buffett Can't Stop Buying This Incredible Value Stock was originally published by The Motley Fool.