Does Warren Buffett Know Something Wall Street Doesn't? The Billionaire Has Been Buying a Nasdaq Stock-Split Stock With a Hearty 4.6% Dividend Yield That Analysts Recently Downgraded.

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Berkshire Hathaway At its core, Warren Buffett is a value investor. Value investing involves finding stocks that are trading below their intrinsic value and buying them at a discount. are sold for a reason. Investors will struggle with whether a stock is truly valuable or whether it is a value trap.

One of the stocks in Berkshire’s portfolio is caught in the middle of this argument. Sirius XM Holdings (NASDAQ: SERI). The digital audio company’s stock is down nearly 58% this year, and some Wall Street analysts recently downgraded it.Despite Sirius’ struggles, Berkshire has been buying the stock all year Warren Buffett Do you know something Wall Street doesn’t?

Let’s take a look.

Sirius, which operates Sirius satellite radio and the Pandora music streaming service, spun off from Liberty Media earlier this year in an effort to streamline its corporate structure, and also conducted a 1-for-10 reverse stock split to make its stock more attractive. for investors.The company has also embarked on a new strategy which includes building its own podcast platform by acquiring exclusive distribution and ad sales rights from major brands such as Call Her Daddy and Smartless.

The new strategy caught the attention of Buffett, who likes a good turnaround story. It also doesn’t hurt that Sirius pays a 4.6% dividend yield and is considering a share buyback. This allows investors to collect passive income while the company makes a turnaround story :

But Sirius recently showed that most turnaround stories require patience. The company provided a strategic update and updated guidance for 2025. Sirius expects next year’s revenue to be around $8.5 billion, down from last year This will detract from forecasted 2024 revenue and is a concern as the company has experienced occasional subscriber declines this year.

In its strategic update, Sirius also said it was targeting savings of $200 million by the end of the year and a further debt reduction of about $700.Management also said it was committed to maintaining the company’s dividend.

The updated guidance led to several downgrades from analysts, who also lowered their price targets, citing headwinds from disappointing guidance and subscriber trends.In many cases, companies are trying to turn around if they can’t show revenue and earnings growth potential as investors question the strength of the core business.

Berkshire has increased its stake in Sirius significantly this year. It is possible that Buffett and his team saw the recent indications of Sirius and sold the stock or reduced its position. However, I think that Buffett and Berkshire probably long-term will be invested in Sirius in the future.After all, these turnaround stories may take several years.

Buffett has been a long-term investor in other long-term turnaround stocks with strong dividends, such as: Kraft Heinz and: Citigroup. Sirius’ board of directors has also authorized a share buyback program, so it may pull that lever at some point as well.

While I’d like to see better subscriber trends, the company has a plan, is generating significant free cash flow, reducing debt and paying a healthy dividend. Remember, most analysts are looking for 12 to 18 months, while Buffett may be happy to hold for years. stock until it pays off, so both groups may be right.Several analysts are still bullish on Sirius’ long-term prospects.

With the stock trading at roughly 8 times earnings, I think long-term investors can afford to give management more time to right the ship.

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Citigroup is an advertising partner of Motley Fool Money. Bram Berkovitz has positions in Citigroup.The Motley Fool has positions in and recommends Berkshire Hathaway.The Spotted Fool has a disclosure policy.

Does Warren Buffett Know Something Wall Street Doesn’t?Billionaire Buys Dividend Shares in Nasdaq Stock With a 4.6% Dividend Yield That Analysts Have Recently Downgraded originally published by The Motley Fool

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