The new investor in Sirius XM Holdings Inc. (NASDAQ:SIRI) is one that would have seemed extremely implausible a couple of years earlier is Berkshire Hathaway. The firm has initiated a position in company, as per the recent SEC filing last week.
The buzz
Berkshire Hathaway closed 2016 with more than 740,000 shares of Sirius. Warren Buffett is a new investor in SIRI stock that attracted penny-stock opportunists in the past. It’s a clever move for investor firm, and obviously it highlights Sirius’s success story. So, what are the reasons that have prompted the leading investor investing into the top firm in satellite radio.
The first obvious reason is cash flow highlights volumes. Buffett may not be an admirer of Howard Stern. He may not also be one of company’s 31.3 million subscribers. But, the one thing that investor knows is the prime value of a massive business that records an even bigger pile of cash.
Sirius can be better called as a money machine. It posted free cash flow of $1.32 billion in 2015, and posted free cash flow of $1.5 billion in 2016. Its projections call for free cash flow of $1.5 billion in 2017, and this is a firm that has historically been conventional with its guidance. Clearly market is paying massive rewards for premium radio, and the segment clearly works.
It’s not wise to call Sirius speculative these days. It has been steadily profitable for years. Importantly, top-line development has been steady, with its revenue surging between 9% and 13% in last five years. It is a known fact that Buffett loves predictable and steady businesses, and that’s what Sirius has become. The company’s scalable model is a planned machine, as its net income has surged faster than revenue in 5 of the last six years. So, definitely investors growing interest is warranted.
