It’s the Christmas season. Warren Buffett may not realize it, but he’s the Santa Claus of investing. A lot of people watch what the icon owns, among the more than three dozen publicly traded stocks at Buffett’s famous holding company.
Some of the names that I think can make great year-end investments right now are Sirius XM (SIRI), Nu Holdings (NU), and Lennar (LEN) (LEN.B) All three stocks are part of Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) stock portfolio. They have also each experienced recent pullbacks that could be buying opportunities. Let’s take a closer look.
1. Sirius XM
Sirius XM is the country’s only game in town when it comes to satellite radio, but it’s not entirely fair to call it a monopoly. Sirius XM competes with popular streaming apps and local terrestrial radio operators, and those rivals are taking their toll, as Sirius XM’s revenue and audience have contracted this year. The opportunity here is that the shares have contracted even faster.
Sirius XM stock has plummeted 58% in 2024. Its latest step down happened earlier this month, after the struggling media giant offered up weak 2025 guidance. Sirius XM now sees revenue declining by 2% next year, and that follows a downward revision of its 2024 outlook back in October. That will make it three consecutive years of negative top-line growth.
Buffett isn’t afraid to buy on the dips, though, and Berkshire was a buyer of this stock in October, adding to its stake in one of its worst performers in 2024. It added nearly 5 million more shares last week, giving Berkshire nearly a third of Sirius XM’s outstanding shares.
There’s a lot to like when it comes to Sirius XM, particularly at its currently depressed pricing. Its subscriber count plateaued five years ago at 34.9 million, and it’s just 5% lower today. There is no shortage of critics arguing that Sirius XM deals in a transitory technology, but if so, the road to obsolescence is apparently going to be a long one. Sirius XM is ridiculously profitable and generating enough free cash flow to pay down its debt and its bloated share count, while still shelling out a generous dividend that’s currently yielding 4.7%.
Wall Street profit targets have inched lower since the disappointing 2025 outlook. However, shares are still trading for less than eight times forward earnings. Sirius XM is a bargain in a market laden with potentially overpriced gainers.
S2. Nu Holdings
Buffett is more “fin” than “tech” in his investing preferences, but he has owned one of the fastest-growing fintech stocks since it went public three years ago. Nu Holdings is the parent company of Nubank, a Latin American digital bank that has come a long way in a short time. A beefy 56% of Brazil’s adult population has a Nubank account, even though the branchless bank launched just 10 years ago.
The stock has also fallen a long way in a short time. Shares of Nu enter this week 36% below the all-time high they reached last month. All Brazilian stocks have declined over the past few weeks, but Nu’s disappointing quarterly report last month didn’t help. Revenue rose 56% on a foreign-exchange neutral basis, or 33% in U.S. dollars. Adjusted earnings soared 67%. It was a reasonably strong report, but investors were concerned about sequential dips in net interest margin and average revenue per active user.
Nu is now trading for 17 times forward earnings. That may not seem cheap for a financial services stock, but given Nu’s stellar growth and long runway, it’s an attractive Buffett stock after this overdone pullback.
3. Lennar
Let’s wrap this up with real estate. Lennar is a Florida-based homebuilder. The stock has declined for nine consecutive trading days, shedding 17% of its value in the process. It’s fallen nearly 30% since peaking three months ago. The company didn’t help its case to bounce back after a poorly received financial update last week. It fell short of market expectations on both ends of the income statement.
The Federal Reserve is signaling a slower pace of rate cuts in the coming year, and that could keep borrowing costs high for potential property buyers. Existing homeowners locked into lower mortgage rates are likely to stay in their current digs longer. This is a challenging climate, but Lennar is now trading for less than 10 times trailing earnings. Analysts see revenue accelerating next year on a 32% jump in net income.
Berkshire owns the less liquid Class B shares of Lennar. They trade at a discount to the more widely traded common stock, yet they have substantially more voting power. The lack of trading volume will make it tricky if Buffett wants to get out in a hurry, but for now it’s a smart way to buy a quality homebuilder at a discount while still having more say on shareholder matters.
— Rick Munarriz
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Source: The Motley Fool