Berkshire Hathaway has some interesting growth and value stocks in its public portfolio.
You might not be Warren Buffett, but you can follow him into some of his investments. And he’s been buying so much of Sirius XM Holdings (SIRI 3.85%) that he now owns more than a third of the satellite radio provider through Berkshire Hathaway (BRK.A 1.90%) (BRK.B 2.05%).
Berkshire Hathaway owns several quality companies outright, but Buffett’s company also has a public portfolio of roughly three dozen stocks. Sirius XM, Nu Holdings (NU 9.12%), and T-Mobile (TMUS -1.20%) are three of the Berkshire Hathaway stocks that I think are no-brainer stocks to buy right now.
Sirius XM Holdings
Like many subscribers to satellite radio, when Buffett dials into something he likes, he doesn’t mind turning up the volume — even if it isn’t popular with mainstream audiences. Berkshire Hathaway initially had some skin in Sirius XM through tracking shares that offered a way into the common stock at a discount. He eventually took a small position in Sirius XM itself, but things got interesting in the fall of last year when the tracking shares were converted into Sirius XM.
Buffett could’ve cashed out, but when Sirius XM continued to slide after the transaction, he decided to keep adding to his position. He now owns 35% of Sirius XM’s outstanding shares, having increased his stake in Sirius XM three times since October.
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Sirius XM has become one of Berkshire Hathaway’s dozen largest positions by market cap. Unfortunately, it has also been one of the worst performers. The media giant has lost nearly half its value over the past year, and it’s easy to see why growth investors have moved on. Judging by Sirius XM’s guidance, this will be the third straight year of negative revenue growth. The platform’s subscriber count is gradually contracting, and there are many cheaper alternatives for in-car entertainment in this era of connected cars that make it seamless to play phone apps through your Bluetooth or cabled vehicle stereo system.
This is where value investors could start following Buffett into Sirius XM. The business is meandering at the moment, but the valuation is compelling. Sirius XM is trading for just 7 times forward earnings. Despite a lack of growth, Sirius XM is still cranking out at least $1 billion in annual free cash flow. It’s a cash cow, and that milk is going to reward investors with share buybacks and a dividend yield approaching 5%.
Sirius XM could return to its winning ways, and not just because analysts see a return to marginal top-line growth next year. Companies are calling employees back to in-office work. Gas prices are still low enough to keep people driving, justifying the value of a broadcasting platform that can be streamed digitally anywhere but is consumed primarily from behind the wheel. This could be one of the cheapest stocks in the Berkshire Hathaway portfolio, and there is a path to either subscriber stability or an actual return to growth.
Nu Holdings
On the other end of the growth spectrum, there’s Nu Holdings. The Brazilian fintech star is also one of the more surprising stocks in Berkshire Hathaway’s public portfolio. It’s the parent company of Nubank, a digital branchless bank that, despite launching just 11 years ago, already has 58% of Brazil’s adult population on its platform.
Revenue soared 50% on an exchange-neutral basis in its latest quarter, but given the rising U.S. dollar, that translates into a mere 24% top-line increase for stateside investors. Growth has been decelerating lately, but adjusted net income still rose 54% for the quarter. Unlike many slower-growing fintech stocks, Nu has been consistently profitable. How can it not be? It costs less than $1 a month to service an account, and monthly average revenue per account is more than $10.
Nu isn’t as cheap as Sirius XM, but it’s refreshingly priced for its growth. The stock is trading for just 19 times this year’s earnings and less than 14 times next year’s profit target. It has expanded into Mexico and Colombia, but it can also keep growing in Brazil despite its heady penetration just by adding more services to its platform.
T-Mobile
Buffett tends to like industry leaders, but he doesn’t own the country’s two largest wireless carriers in terms of revenue. Berkshire Hathaway feels that the bronze medalist is the winning investment among the telcos.
T-Mobile’s two larger rivals trade at lower revenue and earnings multiples while also dishing out much larger dividend yields. The allure for T-Mobile comes in its superior growth and flexibility. It commands a greater market cap and enterprise value than its peers.
Analysts see T-Mobile’s revenue growth at a modest 5% clip in each of the next two years, but that’s more than twice as fast as Wall Street pros see the two larger players boosting their top lines. T-Mobile’s bottom line is growing even faster. Estimates call for earnings per share to climb 10% this year, accelerating to 20% in 2026. Sometimes the leader isn’t the one at the head of the pack.
Rick Munarriz has positions in Nu Holdings and Sirius XM. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Nu Holdings and T-Mobile US. The Motley Fool has a disclosure policy.
