Market falls, follow BRK.B & buy Liberty Media ($LSXMA)?
Warren Buffett, the renowned investor and Chairman of $Berkshire Hathaway(BRK.B)$ has significantly added to the firm’s extensive portfolio by buying shares in $Liberty Media Series A(LSXMA)$.
On 04 Jan 2024, Mr Buffett through his investment firm has purchased an additional 1,090,754 shares of Liberty Media Series A.
Transaction price was $29.76 per share. Total purchase amounted to over $82 Million.
With the recent purchase, Berkshire Hathaway’s total holdings in LSXMA has increased to 21,298,434 shares, (as reported on X [Twitter] by stock market analyst - Evan on 5 Jan 2024].
With the latest purchase, Berkshire Hathaway is now proud owner of 6.52% of Liberty Media.
Buffett’s penchant for media business
Truth be told, Mr Warren Buffett has a rich history of involvement with media and entertainment enterprises.
The 93-year-old billionaire has maintained a deep connection to the industry.
He has previously owned 30 daily newspapers, including his hometown publication, the Omaha World-Herald; with all these holdings grouped under Berkshire’s print publishing unit, BH Media Group.
Currently, the media industry is facing a lot of challenges and disruptions as digital technology looks set to change the way media reaches out to the masses.
Despite the headwinds, Buffett, a lifelong newspaper enthusiast, has expressed enduring interest.
For example, newspaper The Washington Post used to be a prized asset within Berkshire’s portfolio until 2014 when it was sold to $Amazon.com(AMZN)$ for $250 Million.
Liberty Media Series A - Analysis:
What is this company about?
Sirius XM Holdings is one-third subsidiary of media conglomerate Liberty Media Corporation.
Its Sirius XM Holdings segment operates two complementary audio entertainment businesses:
SiriusXM.
Pandora and Off-platform.
SiriusXM features music, sports, entertainment, comedy, talk, news, traffic and weather channels and other content, as well as podcasts and infotainment services, in the United States on a subscription fee basis.
SiriusXM’s packages include live, curated and certain exclusive and on-demand programming.
Further, it offers ad-supported radio services; Pandora Plus, a radio subscription service; and Pandora Premium, an on-demand subscription service.
Peer comparison - Revenue, net income & market cap.
Comparison with peer media-related stocks reveals more about (a) the media sector as a whole and of course (b) Liberty Media. (see below)
There are monies to be made and stocks to be avoided despite carrying brand equity name eg. Paramount…
Market cap. It is the leader at $20.96 Billion.
Revenue (trailing 12 months, TTM). It is in the middle, not the top, neither the bottom.
Net income. It is again the leader.
Peer comparison - Profitability
Gross margin. It leads in trailing 12 months gross margin and is #2 for 5 years average.
Net profit margin. It is #2 in trailing 12 months net profit margin and is #3 for 5 years average.
Top 10 shareholders.
Besides Berkshire Hathaway, who are the remaining Top 10 institutional shareholders of LSXMA?
LSXMA - Top 10 Institutional shareholders
Collectively, these Top 10 institutional investors owns almost 60% of Liberty Media.
Personally, I think this is “good” news because there are 2 major advantages. (see below)
Advantages for Liberty Media:
Stability and Long-Term Focus: Institutional investors generally have longer investment horizons than retail investors. They are less likely to sell their shares based on short-term market fluctuations or news cycles. This provides the company with greater stability & predictability in its shareholder base.
Increased Access to Capital: Institutional investors often manage large pools of capital and may be more willing to provide additional funding to the company through equity offerings or debt financing. This comes in handy for companies looking to expand or pursue new opportunities.
Enhanced Market Credibility: When a company has a strong institutional ownership base, it can be seen as more credible and trustworthy by other investors, including both institutions and retail investors; leading to increased demand for the company's stock and potentially higher share prices.
Improved Corporate Governance: Some studies suggest that companies with higher institutional ownership tend to have stronger corporate governance practices. Often institutional investors monitor company management closely and are more likely to hold them accountable for poor performance or unethical behavior.
Advantages for US market:
Increased Market Efficiency: Institutional investors have access to sophisticated research and analysis tools, that help them make informed investment decisions, leading to greater market efficiency by reducing price volatility and mispricing of securities.
Improved Liquidity: When large major percentage of share are held by institutional investors, they are more likely to be actively traded, improving the liquidity of the stock and making it easier for investors to buy and sell shares, which can further increase market efficiency.
Reduced Systemic Risk: Institutional investors often take a more diversified approach to investing, that helps reduce systemic risk in the financial system as they are less likely to be exposed to the same risks as individual investors.
On Fri, 05 Jan 2024 — LSXMA was trading at $30.64 per share, upped +1.14$ from its previous close. (see below)
Weekly performance was a credible +5.69% gain over past 5 trading sessions.
Since its M&A of QuintEvents LLC and its rebranding in August, this stock has gained +28.86%.
Overall rating - STRONG BUY!
All three technical indicators on TradingView for Liberty SiriusXM all points to a “Strong Buy” indication: (see below)
Summary. A comprehensive evaluation of these indicators assigns a ‘strong buy’ rating at 16.
Moving averages. This indicator came in strong at 14.
Oscillators are inclining towards a ‘Buy’ rating, registering at 2.
Apart from the FAANG and Magnificent 7 - there are a lot of quality companies out there.
If not for the Finbold news article (see below), I would not have learnt about this media company, that is so understated.
Casting aside whether the purchase is made (a) out of nostalgia for the days of old or (b) if there is a genuine potential that “the sage of Omaha” sees in it, the results speak for itself when compare against its peers (see above two “peach” colour tables).
Mr Buffett really knows what he is getting into with his purchase. It is an $82 Million buy-in afterall.
Probably, the only “downside” to this stock is its relatively “thin” average trading volume, coming in at 934,556.
It is not as heavily traded stocks like Nvidia (42,020,904) or Microsoft (26,001,401) or Tesla (118,775,627).
According to the media, this may become an issue when it is time to sell the shares, due to few buyers.
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