Warren Buffett Continues to Load Up On This Value Stock That’s Already Up 20% This Year. Should You Follow?

Key Takeaways:

• Berkshire Hathaway continues buying Sirius XM stock despite previous large-scale selling.
• Sirius XM reports first net subscriber growth in its core segment since 2023.
• Earnings per share grew by nearly 24% despite revenue declines.
• Cost-cutting measures and focus on core audiences are improving financial health.
• The stock has risen 20% in 2025 but remains 60% below 2022 levels.

Why Warren Buffett Is Betting Big on Sirius XM

Warren Buffett’s Berkshire Hathaway is making a significant bet on Sirius XM, the satellite radio company showing promising signs of a turnaround after a period of decline. Even as Berkshire was a net seller of stocks in 2024, divesting a massive $133 billion against just $6 billion in buys, the conglomerate has continued to increase its stake in Sirius XM. This strategic move has captured the attention of investors worldwide.

A Contrarian Move Amid Widespread Selling

Last year, Berkshire Hathaway surprised the market by reducing its holdings in major companies like Apple and Bank of America. Amid this widespread selling, Berkshire took a contrasting approach with Sirius XM. On February 3, Berkshire disclosed an additional purchase of 2.3 million Sirius XM shares for $54 million, even as the stock price began to recover. This purchase came shortly after Sirius XM’s January 30 earnings report, suggesting confidence in the company’s direction.

The Backstory of Berkshire’s Investment

Berkshire’s involvement with Sirius XM dates back to 2016 through the Liberty Sirius XM tracking stock, which tracked John Malone’s Liberty Media investment in the company. When it was announced in early 2024 that the tracking stock would merge with the regular shares, Berkshire increased its stake, capitalizing on the discount offered by the tracking stock. Despite a plunge in Sirius XM’s stock in 2024 due to declining subscribers, revenue, and free cash flow, Berkshire continued to buy, betting on a future turnaround.

Signs of a Turnaround at Sirius XM

In the fourth quarter, Sirius XM exhibited signs of recovery. The core Sirius XM segment experienced net subscriber growth, adding 70,000 subscribers—the first quarterly increase since the second quarter of 2023. This growth included 149,000 self-pay subscriber additions, partially offset by a decline of 79,000 in paid promotional subscribers.

Additionally, Sirius XM saw a 24% growth in podcast advertising revenue during the quarter, a positive outcome of last year’s podcast investments. The company reduced operating expenses across the board, enabling an increase in operating income and net earnings per share, despite a 4.3% decline in revenue. Diluted earnings per share grew nearly 24% to $0.83.

Cost-Cutting Measures and Financial Strategies

Looking ahead, Sirius XM plans to implement further cost reductions, targeting an additional $200 million in savings. Management forecasts an increase in free cash flow to $1.15 billion in 2025, up from $1.02 billion in 2024. The company has also resumed share repurchases, retiring 0.3 million shares at multi-year low prices in the fourth quarter.

While Sirius XM is focusing on deleveraging and reducing debt, it is also enhancing customer satisfaction by introducing features like one-click cancellation and offering a wider variety of subscription packages. These initiatives may initially increase churn but are intended to improve the quality of the subscriber base in the long run.

Buffett’s Confidence Signals Potential

Warren Buffett’s continued investment after the earnings report indicates his confidence in Sirius XM’s future. The stock has already seen a 20% rise at the start of 2025 yet remains about 60% below its 2022 levels. If Sirius XM can sustain its subscriber growth and improve profit margins, there may be significant upside potential.

For investors, Buffett’s actions often serve as a bellwether. His commitment to Sirius XM suggests that the company may be poised for a meaningful rebound. As Sirius XM executes its strategic plans, the investment community will be watching closely to see if Buffett’s bet pays off.