Warren Buffett’s Berkshire Hathaway Embraces Change Amid Retirement

Warren Buffett has recently announced his retirement as CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). The Oracle of Omaha leaves the role after a successful run, notably selling numerous winning stocks in 2024, further cementing his legacy as one of the greatest investors of all time.

However, Berkshire Hathaway wasn’t simply offloading stocks last year. Buffett and his investment team also increased their investments in certain companies, making these strategic buys particularly noteworthy. Among them are Sirius XM (NASDAQ: SIRI) and VeriSign (NASDAQ: VRSN).

Exploring Buffett’s Investment Choices

Buffett likely favors these companies for their strong economic “moats” and consistent, dependable subscription revenue. Sirius XM and VeriSign both maintain high-margin revenue streams, enabling them to reward shareholders through share repurchases and dividends.

VeriSign operates as the official registry for all .com and .net internet addresses and manages two of the 13 critical root zones for the global internet. This positions the company in a monopolistic role, as every .com and .net IP address must pay VeriSign a monthly subscription fee.

Similarly, Sirius XM holds a unique position as the only satellite radio provider, primarily catering to automotive customers. Unlike traditional AM or FM stations, Sirius XM delivers a broader range of channels featuring music, sports, and news. Its premium offerings, along with exclusive content, attract high-net-worth individuals and families.

Nonetheless, streaming services have begun to encroach on Sirius XM’s territory, prompting the company to adapt its strategy.

Revenue Trends: Diverging Paths

Sirius XM’s revenue is currently facing more challenges compared to VeriSign’s performance.

Despite a slight decline in .com and .net domain names in its recent quarter, VeriSign managed to grow its revenue by 4.7%, supported by contractually allowed price increases for these domains. Encouragingly, VeriSign anticipates that the recent decline in domain names—evident since the pandemic’s peak—may stabilize this year and potentially reverse. The company has secured a new six-year contract with the Internet Corporation for Assigned Names and Numbers (ICANN) and the National Telecommunications and Information Administration (NTIA), ensuring its monopoly status for the duration of the agreement. This contract also permits VeriSign to raise .com prices by up to 7% over the final four years.

With the renewal of the contract, an improving domain name cycle, and planned price hikes, VeriSign appears poised for growth above GDP over the next several years.

Conversely, Sirius XM has been noting subscriber and revenue declines since the fourth quarter of 2022, impacted by rising interest rates that have reduced consumer and automotive demand. The company often attracts customers through trials funded by automakers as incentives for car buyers. When these trial periods end, new owners must decide whether to subscribe.

As new car sales have slowed, Sirius XM’s primary method for customer acquisition has also tightened. Additionally, modern cars’ ability to connect to smartphones and access streaming stations has introduced further challenges.

Last quarter, Sirius XM reported a 1.7% decline in its subscriber base, with its Pandora segment experiencing a 4.8% drop, resulting in an overall revenue decline of 4.3%. However, the company did see its churn rate improve over the past year, from 1.7% to 1.6%. This suggests that the decrease in subscribers may stem more from reduced new customer acquisition than from loss of existing subscribers.

Image source: Getty Images.

Growth Strategies in Motion

Both Sirius XM and VeriSign have implemented strategies to reinvigorate growth, though Sirius XM’s efforts are more extensive.

Recently, Sirius XM has aimed to concentrate on its key in-vehicle audience, stepping back from efforts to expand its mobile app due to less reliable subscribers outside of vehicles.

The company is also focusing on premium customers, enhancing content and value to core subscriptions while initiating a price increase in March. Management has noted that they achieved reduced churn even amid higher prices, thanks to added value.

Sirius XM is introducing a new, lower-cost, ad-supported tier that includes simplified channel options, aimed at attracting lower-income customers. This new offering is in its initial rollout phase, but could mirror the growth success seen by Netflix with its ad-supported tier.

Additionally, Sirius XM is forging new partnerships with automakers for the 2026 model year, improving its marketing strategies for used car buyers as well. In the past, the company had limited access to used vehicle sales, impacting its ability to reach new owners. This enhancement should broaden the marketing reach in 2026 and offer some protection against potential declines in new auto sales.

Despite recent downturns, Sirius XM has reaffirmed its revenue, adjusted EBITDA, and free cash flow targets for 2025. Management is optimistic that subscriber losses will stabilize compared to the same period last year, suggesting signs of the effectiveness of their turnaround initiatives.

VeriSign, meanwhile, is prioritizing its domain name growth strategy by partnering with retail registrars to boost customer acquisition. In recent years, registrars had focused on cost-cutting rather than customer growth. However, VeriSign is collaborating closely with these partners to implement enhanced marketing programs to reignite domain name growth. This strategy is already yielding results, prompting a recent increase in VeriSign’s 2025 guidance.

Valuation Insights: A Significant Disparity

VeriSign’s new contract, updated guidance, and its first-ever dividend have elevated the company’s stock by 33.3% this year. In stark contrast, Sirius XM has struggled through a challenging 2024, with a decline of 2.2% year-to-date.

VRSN Year to Date Total Returns (Daily) data by YCharts.

As a result, there exists a notable discrepancy in valuations between these companies. VeriSign is currently priced at 31 times this year’s earnings estimates, accompanied by a forward dividend yield of 1.1%.