Last month, I mentioned that Sirius XM Holdings (SIRI) is a strong buy due to its price-to-free-cash-flow ratio of 10, annual dividend payments of 4.3%, and plans to buy back $1.2 billion in stock. Since then, Sirius shares have risen 8.1% after Berkshire Hathaway disclosed it increased its stake in the company.
Buffett’s New Purchase
Berkshire Hathaway bought 3.6 million Sirius shares from Oct. 9 to Oct. 11, bringing its total to 108.7 million shares, or 32% of the company.
Of this, about 6.6% is directly owned by Berkshire, while 25.5% is owned through its subsidiary, New England Asset Management.
Should You Invest in Sirius?
Warren Buffett sees potential in Sirius, and so should you. The stock has risen nearly 20% since I recommended it, but it still presents value with a P/E ratio of 7 and projected earnings growth of 12% annually for the next five years. Despite its significant debt, Sirius’s free cash flow is strong, making it a good buy with a solid 4.3% dividend yield.
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