Susan Dziubinski: I’m Susan Dziubinski with Morningstar. Many investors monitor which stocks Warren Buffett’s Berkshire Hathaway BRK.A BRK.B buys and sells. After all, Buffett is regarded by most everyone as one the greatest investors of all time.
Today, we’re taking a look at two stocks that Berkshire Hathaway has been buying lately.
Warren Buffett Is Buying These 2 Stocks. You Probably Shouldn’t.
- Domino’s Pizza DPZ
- Sirius XM Holdings SIRI
The first Buffett buy we’re looking at today is Domino’s Pizza DPZ. Berkshire Hathaway initiated a new position in the company during the third quarter. In many ways, Domino’s is a natural pick for Berkshire Hathaway. For one, the company has carved out a wide economic moat, which isn’t easy to do in the restaurant industry, given minimal switching costs, evolving consumer preferences, and constant innovation. Notably, Domino’s attention to operator profitability has allowed the company to generate some of the best store-level economics and growth prospects in the restaurant industry. And the firm’s brand-strengthening investments and recent operational innovations have led Morningstar to award management an Exemplary Capital Allocation Rating. At the right price, we think Domino’s Pizza is an excellent company to own—but it’s not at the right price, according to our metrics. Shares are trading right around our $415 fair value estimate, so we’d wait for a margin of safety before picking up shares.
Read: How to Invest Like Warren Buffett
The second Buffett buy on our list today is Sirius XM Holdings SIRI. Berkshire purchased additional shares of Sirius XM stock in October, and as of today, Berkshire owns an estimated one third of Sirius XM’s outstanding stock. Unlike its investment in Domino’s, Berkshire’s Sirius XM investment isn’t really classic Buffett. The stock doesn’t have an economic moat, it’s fighting what many believe to be a losing battle with streaming services, and Morningstar thinks Sirius XM will have a tough time growing its subscriber base. Earlier this year, many Buffett watchers thought Berkshire was engaging in some sort of arbitrage play, as Berkshire owned shares of Liberty Media’s Sirius XM tracking stock that merged with Sirius XM in September. But the postmerger purchases suggest there could be more to it, though Buffett hasn’t yet commented publicly on the position. So, is Sirius XM a buy? We don’t think so, especially given the high level of uncertainty around the stock.
Read: The 3 Warren Buffett Stocks to Buy After Berkshire Hathaway’s New 13F Filing
For more from Morningstar about stocks to buy, sell, or hold, subscribe to our channel or visit Morningstar.com.
Morningstar senior analysts Matthew Dolgin and Sean Dunlop provided the research behind this segment.
Watch 2 Top Stocks for Value Investors to Buy Now for more from Susan Dziubinski.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
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