While Buffett has been adding to his SiriusXM stake, there are some better options in the media sector.
Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B 0.99%) seems to have found the latest apple of its eye. The trillion-dollar conglomerate has been rapidly accumulating shares of SiriusXM Holdings (SIRI 2.39%), the satellite radio company that’s considered a monopoly by some investors.
Berkshire now owns 32% of SiriusXM, according to the most recent SEC filings.
Buffett isn’t new to Sirius stock. He first acquired shares of the company in 2016 through the Liberty Media SiriusXM stock, which was recently spun off as Sirius became an independent company again.
Buffett hasn’t explained why he likes SiriusXM. But he’s long been a fan of media stocks, seeing newspapers as local monopolies in earlier eras, and he owned a hefty share of the Washington Post for decades.
SiriusXM checks those boxes as the only satellite radio company currently operating, and it’s a stable business with a solid subscriber base. It currently has a cheap valuation of 8 and a dividend yield of 4.1%, two qualities that Buffett surely appreciates.
However, SiriusXM has struggled to grow, and the stock has been a chronic underperformer over the period of time that Buffett has owned it.
If you’re thinking of following Buffett into SiriusXM, there are two other media stocks you’re better off considering.
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1. The New York Times Company
The New York Times Company (NYT 0.05%), which owns its eponymous newspaper and a handful of smaller media properties like The Athletic and Wordle, seems to have much of what Buffett looks for in a media stock.
The New York Times has a top-notch brand in news, and its reporting sets the news agenda for much of the media, including television. Not only do readers look to the Times for that reason, but because of its prestige, it’s able to attract top journalism talent.
The digital era has been a challenging one for newspapers, but the Times has successfully pivoted, and it’s built a strong digital subscription business even as the print business continues to decline.
It now has 10.8 million total subscribers, up 10% from a year ago, showing steady growth. Revenue rose 6% to $625.1 million, and it reported adjusted operating margin of 18.3%.
The digital business now makes up a majority of its revenue, and its growth could accelerate as less revenue comes from the print side. With a strong brand, a solid business model, and an established position as the leader in the news industry, The New York Times Co. looks well-positioned for long-term growth.
2. Netflix
Netflix (NFLX -0.74%) remains a top stock in media, as the company’s third-quarter earnings report indicates.
Netflix has demonstrated its wide economic moat time and again. Nearly 300 million households around the world now subscribe to the service. At a time when many of its legacy media competitors are struggling, Netflix continues to win new customers and grow profits, unburdened by traditional cable and broadcast channels.
Netflix’s subscriber base has given it the firepower to invest in a wide range of entertainment so it can attract new subscribers, retain existing ones, and pass along occasional price increases. The nature of the subscription business model also benefits Netflix, as the company expects its operating margin to increase steadily as it grows.
The streamer has a number of competitive advantages, including its massive subscriber base, global content, and expertise in curating new programming.
For investors like Buffett, who favor industry leaders with sustainable competitive advantages, Netflix looks like an excellent fit. The streaming stock has already been one of the best-performing stocks of this century, but it still has more room to run higher as it grows in emerging markets like Asia.
Jeremy Bowman has positions in Netflix. The Motley Fool has positions in and recommends Berkshire Hathaway, Netflix, and The New York Times Co. The Motley Fool has a disclosure policy.