Warren Buffett Doubles Down: Inside Berkshire's Growing Stakes in SiriusXM and Occidental Petroleum

#Headline Investments: SiriusXM and Occidental Petroleum

Berkshire Hathaway’s latest filings reveal significant purchases in two very different companies: SiriusXM Holdings and Occidental Petroleum. As of the last quarter, Berkshire bought 43.6 million shares of SiriusXM, worth approximately $160 million, and increased its stake in Occidental Petroleum by an additional 14.4 million shares, valued at $884 million at the time of purchase.

While these moves might appear disconnected, they both underscore a key theme: Buffett’s willingness to bet on cash-generating businesses with established customer bases. However, given SiriusXM’s stock is down a staggering -66.65% over the past five years, and Occidental is only up a modest +24.53% in the same timeframe, these investments seem to hinge on very long-term horizons.

Looking at Berkshire’s cash reserves, the company’s $157 billion cash hoard as of its most-recent filing has ballooned over the past few years signaling a deliberate buildup for strategic investments. It’s a jaw-dropping war chest, even by Buffett’s standards, and sets the stage for bold, carefully calculated moves.

#SiriusXM: Is the Static Worth the Signal?

SiriusXM is best known for its satellite radio service, offering ad-free music, live sports, news, and talk programming. The company operates on a subscription-based model, with 34.2 million subscribers as of Q3 2024. While SiriusXM’s audio offerings might sound like a solid business, its growth has been stagnating, with subscriber numbers barely budging from the 34.9 million it reported in 2019.

The elephant in the room is SiriusXM’s stock performance. Down -66.65% over the past five years, this is a company that has struggled to retain investor confidence. So why is Buffett interested? The answer likely lies in SiriusXM’s steady cash flow. The company generates significant free cash flow from its subscription revenue, which can be appealing to a value investor like Buffett, who prioritizes strong fundamentals over market sentiment.

At an average cost basis of $23.90 per share, Berkshire’s recent addition to their stake in the company suggests Buffett sees SiriusXM as currently undervalued. However, the big question is whether SiriusXM can evolve beyond its current offerings. In a world dominated by Spotify and Apple Music, SiriusXM must find innovative ways to remain relevant.

On the subscriber front, SiriusXM’s ability to bundle services with automakers has been a key driver of its customer base. But with carmakers increasingly offering integrated streaming services, this strategy faces headwinds. The company’s success hinges on retaining subscribers and finding new ways to monetize its loyal audience.

#Occidental Petroleum: Digging for Long-Term Value

Occidental Petroleum, a major player in the oil and gas sector, has been a favorite of Buffett in recent years. Berkshire’s stake now exceeds 25%, solidifying it as one of the company’s largest equity holdings. At an average cost basis of $54.50 per share, Buffett appears to view Occidental as a cornerstone investment in the energy space.

Occidental’s business model centers around oil exploration, production, and carbon capture initiatives. While its stock is up just +24.53% over the past five years, the company’s focus on carbon capture and sustainable energy positions it for growth in a transitioning energy landscape. However, the oil market is notoriously volatile, and Occidental’s performance remains closely tied to global energy prices.

From a cash flow perspective, Occidental’s ability to generate strong returns during periods of elevated oil prices makes it a classic Buffett pick. The company’s recent investments in direct air capture technology signal its intent to adapt to a low-carbon future—a move that aligns with long-term energy trends.

Still, Occidental’s modest five-year stock performance raises questions about the timing of Berkshire’s purchases. Does Buffett see value in the company’s current valuation, or is he betting on oil prices rebounding? Either way, it’s a move that underscores Berkshire’s patience and focus on long-term returns.

#Buffett’s Strategy: Playing the Long Game

Both SiriusXM and Occidental Petroleum reflect Buffett’s enduring investment philosophy: buy undervalued companies with strong cash flows and hold for the long term. These investments aren’t flashy, but they align with Berkshire’s broader strategy of building a diversified portfolio that thrives in different market conditions.

However, critics might argue that Berkshire’s bets on struggling or slow-growth companies like SiriusXM highlight a potential downside of its massive cash position. With so much capital to deploy, finding high-quality investments that can meaningfully move the needle is increasingly challenging.

Ultimately, Buffett’s moves signal a calculated approach: he’s willing to wait for these investments to bear fruit, even if the market doesn’t immediately recognize their potential. Whether SiriusXM and Occidental prove to be wise bets or missed opportunities remains to be seen, but one thing is clear: Buffett is in no rush to cash out.

#Calculated Risks in an Evolving Market

Warren Buffett’s latest investments in SiriusXM and Occidental Petroleum reveal a fascinating interplay of value investing principles and long-term strategy. While both companies face unique challenges, their ability to generate cash flow makes them compelling additions to Berkshire Hathaway’s portfolio.

For investors watching from the sidelines, these moves are a reminder that Buffett’s approach is as much about patience as it is about precision. Whether these bets pay off will depend on factors ranging from oil prices to consumer behavior, but if history is any guide, underestimating the Oracle of Omaha is rarely a wise move.