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- Manlobbi
Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A) ❤
No. of Recommendations: 3
No. of Recommendations: 16
Weschler is buying about 20-25% of the volume, which means he is buying as much as he can. His purchase spree has actually already driven up the stock as it started to change direction right when Weschler entered the market.
He started right one month after the merger, given that he was probably restricted as an insider/10% owner. BRK now owns 32% of SIRI.
The SIRI story is actually quite simple: Over the past year or so the company remodelled its range of subscriptions and pricing, invested in a new app, analytics, new satellites and in the meantime reduced marketing spending. At the same time, car sales were down, which reduced the potential subscriber funnel. As a result, they lost some subscribers (surprisingly little, I believe, given the situation).
SIRI trades for less than 8x FCF, which is heavily depressed by the above mentioned temporary effects, in addition to one-off merger costs. It will certainly grow again to the $1.4-1.5B level within 2 years. It currently trades for $8.5B and pays an over three times covered 4% dividend.
The market is concerned about competition, an audience skewing older, debt (temporarily higher because of the Liberty transaction, which effectively was a buyback), and there was lots of technical noise around the transaction.
No. of Recommendations: 6
Great summary of SIRI EarlyRetiree
I bought it for the arbitrage, which didn’t work out for me and I’m now a long term investor! Think I’m down 25% at this point. Certainly great to see Berkshire continuing to hover up shares.
The price is certainly cheap and the market clearly hates it and is worried it’s in terminal decline. I will play it out as long as Berkshire is an owner. I have no insight into subscription numbers 10 years from now for this technology but imagine it’s not quite as bad as the market thinks.
I’m not in the US but this sounds like a premium service. No adds. If I can afford it I would use it. I like the DJ lead consumption especially while driving. I like how streaming services have to pay per play but SIRI doesn’t and has higher margins. I like the relationships with car manufacturers and the free promotion offers to get customers onboarded. I like the high retention rate. I like that consumers spend more time with it than anything else, even YouTube. I like the sports franchise. I like the connectivity provided by satellite. Would love to hear why Berkshire owns it.
I don’t like that it’s technology and things can change quickly. The receiver in the car looks clunky and dated from pictures I’ve seen online and that worries me. Would prefer if it was more integrated with the car (not sure about this point??).
Addition to the index is perhaps the biggest high probability event that would bring buyers in and you could see the SP substantially higher very quickly. Certainly not why Berkshire is buying but I’d take it personally.
Big reduction in capex program that management have discussed seems controllable and high probability. Berkshire would like that a lot I imagine.
If I had to guess I would say Berkshire knows consumer behaviour is unlikely to change rapidly. And Berkshire’s insights in car dealerships is comforting.
Possible outcomes look like.
1. Subscriber numbers decline significantly, making the business unviable within 7 to 10 years. Maybe new technology makes it obsolete, or car manufacturers take a different route. Consumer behaviour switches dramatically to streaming. That makes it a huge dud. I’ll guess the probability of this at 10%. The market thinks it’s a lot higher.
2. Subscriber numbers decline at a slow rate, say 2% a year and 15 years from now the business is still around and doing ok but suffering from an ageing customer base. That would be a pleasant outcome. FCF over that period would be substantially in excess of the current market cap. A 50 year old customer today will still be a customer at 65. Maybe a 30 year old today can’t afford it but might become a customer at 45 as their wealth grows. Probability 80%.
3. Management really execute with content, retention. Maybe less distracted by the reorganisation. If they could report any improvement in subscription numbers the share price could move higher by a lot. 12 X FCF would not be an unreasonable valuation. Will give this a 20% probability.
4. Takeover by private equity or even Berkshire. Probably a bit early after the reorganisation for management to throw in the towel yet, especially at current valuation. But could happen in a year or two. Impossible to predict but the longer it stays cheap the higher the probability of receiving an offer. Berkshire certainly has loads of these low growth cash cows and plenty of previous interest in media investments.
No. of Recommendations: 5
Normally I wouldn't give SIRI a thought whatsoever but the fact that Ted is seemingly buying hand over fist makes this very intriguing. I believe Ted has a reputation of an investor who does exhaustive research and if he is backing up the truck that tells me there might be something here...
No. of Recommendations: 5
I bought it for the arbitrage, which didn’t work out for me and I’m now a long term investor! Think I’m down 25% at this point.
There is a saying, "don't let a trade become an investment".
If a quick trade doesn't pan out, cut your loss and move on. Don't hang on after the reason you bought is no longer the case.
No. of Recommendations: 1
“ I bought it for the arbitrage, which didn’t work out for me and I’m now a long term investor! Think I’m down 25% at this point. Certainly great to see Berkshire continuing to hover up shares.”
Same here, but hay, the unrealized/realized capital lose is an asset isn’t it ;)
No. of Recommendations: 22
I think SIRI is similar to the newspaper business. The competing streaming services have a better mousetrap. SIRI's current users will be tapering off and younger users are highly unlikely to sign up. Spotify pays more per song streamed than SIRI but that's because its users can choose exactly which songs they want to stream. So Spotify is a better service than SIRI for music lovers and podcasters. In addition competitors like Spotify & Apple Music have a global scale that's much bigger in the long run than SIRI. These streaming services don't pay carriage fees and don't have satellite capex which is an advantage. Finally, SIRI interface looks so old and tired it's hard to imagine it attracts a lot of younger crowd. The only advantage SIRI has is with coverage in rural areas in the US & Canada where the cell service is spotty. Even there, Starlink in combination with a streaming service is a better option. You get internet in addition to just audio.
So in my mind the best case scenario for SIRI is a slow decline towards irrelevance. It is cheap based on today's metrics but it is hard for me to tell if it is justifiably cheap or not.
No. of Recommendations: 5
Munger_Disciple thank you for that sobering analysis. It sounds like the facts of the matter. A slow decline. The only question is: how slow. The current FCF and 8 multiple is probably attractive but it’s a cigar butt. Maybe the FCF gives it a margin of safety. Certainly compared to other companies with high multiples and high expectations for future FCF, it might also fare better in a market decline. Hardly an endorsement but maybe not loosing money is Berkshire’s attraction.
Berkshire has done some very mediocre investments over the years and this does look like another one. IBM, Paramount Global were two that come to mind. I suppose if SIRI does play out to be a dud, the bigger concern is what does this mean for capital allocation in the public markets in the long term. Another dud to add to the list. It’s just so hard for Berkshire to find anything good now.
I guess the lesson is, as was pointed out here last week, copying Berkshire’s trades nowadays is not a great idea.
For me, I will play it out until Berkshire sells.
No. of Recommendations: 6
Similarly, I had some WBD (dipped a toe) bought it at 8$ and sold it at 8$ after 3 months. I'd been watching it for a long time, interest piqued by the large Baupost holding on a low price to free cashflow multiple, paying down debt, business turnaround etc.
However, looking at the big picture their business is deteriorating, lots of competition, declining cable subs, lost the sports contract.
I thought why am I bothering when there's better, easier to understand opportunities around.
When a growth story is not there and they are replying on cashflow and a slow decline, that can often turn into a quick decline that snowballs, that's in the too hard pile for me from now on. It often seems to play out that way where super investors pick an investment go in big on a turnaround and the 15 PE turns into a 8 PE and drops another 50%.
Just an observation.
No. of Recommendations: 3
Munger_Disciple thank you for that sobering analysis. It sounds like the facts of the matter. A slow decline. The only question is: how slow. The current FCF and 8 multiple is probably attractive but it’s a cigar butt.
Yo are welcome @EVBigMacMeal. Don't forget the leverage associated with SIRI before getting too excited about FCF. Malone's mode of operation is to load up all his companies to the t*ts which bit him in the a$$ many times. Sometime I wonder if he prefers his companies to go bankrupt than pay taxes (which the company does if it runs with a prudent leverage). So you always have that risk with a Malone controlled business.
No. of Recommendations: 2
Coat tailing BRK/Buffett has generally not worked out that well for awhile. At least it hasn’t for me🤷♂️
No. of Recommendations: 1
Coat tailing anyone’s 13F doesn’t yield consistent result. There’s slight alphas selling what people buy and buying what people sold.
No. of Recommendations: 0
SD, this is very true, I combine 6 month lists with current 52 week lows and my own thorough assessment of the business (metrics and moats) I call that the M&Ms, then pick what I consider to be the best out of that.
Many super investors picks do not stack up. This may be because they are looking at too much diversification? (however sometimes they really pile in)
This review therefore also needs to be combined with looking at what percentage of overall assets a buy makes up in their fund.
The way I've used the lists is more to create my own watch list of quality companies to watch, undertake my own assessment of IV and buy when they are attractively valued IMO.
Investments I've made using this approach historically include, Alphabet, Meta, Starbucks, Nike, PayPal, Disney, and some of the Chinese ADRs such as BABA,JD and YUMC (those are looking better now, bought into the Ray Dalios sales pitch too much 😂) the recent rally and some sales mean I've come out ahead but you also have to think of opportunity cost.
I'm still puzzled why Dalio was talking up China so much then selling and buying US stalwarts like Walmart? Watch what they do and not what they say?
No. of Recommendations: 0
And OXY of course. Buffett pick (but at 50 not 60)
No. of Recommendations: 2
Coat tailing anyone’s 13F doesn’t yield consistent result.
Yup. A few years ago I coattailed a famous and very profitable mutual fund guy by the 13Fs. Don't recall his name, but you & I would recognize it.
Did NOT work very well at all. If you want to mimic a great manager do it by buying his fund.
No. of Recommendations: 1
Also best to look at those managers who are more LTBH, looking for compounders vs traders.
Everyone on YouTube follows Michael Burrys portfolio but as soon as they've bought (coat tailing) he's sold again 😂
