The Legal Monopoly Warren Buffett Couldn't Stop Buying Before His Retirement Makes for a Screaming Buy in 2026

When 2025 came to a close, arguably the greatest investor of our generation, billionaire Warren Buffett, hung up his work coat for the final time and retired as CEO of conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B).

Over his roughly six decades as the head of Berkshire, the aptly named Oracle of Omaha oversaw a cumulative return in his company's Class A shares (BRK.A) of nearly 6,100,000%, which worked out to almost 20% on an annualized basis. Although Buffett wasn't always right, his winners often won big.

Berkshire Hathaway's now-retired CEO, Warren Buffett. Image source: The Motley Fool.

But in the three years leading up to Buffett's retirement, Berkshire Hathaway's boss struggled to find value. The company's consolidated cash flow statements show that its (now-former) billionaire boss was a net seller of stocks for 12 consecutive quarters (Oct. 1, 2022 – Sept. 30, 2025), to the cumulative tune of $184 billion. While Warren Buffett would occasionally break one of his unwritten investing rules, he was unwavering in his commitment to value and getting a good deal.

However, there was one stock that continued to catch his eye in the quarters and years that led up to his retirement. It also happens to be one of Wall Street's few legal monopolies and makes for a screaming buy in the new year. I'm talking about satellite-radio operator, Sirius XM Holdings (NASDAQ: SIRI).

Many investors tuned out Sirius XM for three reasons

Although Wall Street has been firmly in a bull market rally since October 2022, Sirius XM has been relegated to the sidelines. Whereas the benchmark S&P 500 is approaching a nearly 70% gain since bottoming out during the 2022 bear market, shares of Sirius XM Holdings have plummeted by approximately 67%.

Three catalysts can explain this bifurcation between Wall Street and Sirius XM stock.

Target Federal Funds Rate Lower Limit data by YCharts.

To begin with, the Federal Reserve engaged in one of its most aggressive rate-hiking cycles in decades from March 2022 through July 2023. During this stretch, the nation's central bank increased its federal funds target rate by 525 basis points. Raising the overnight lending rate between financial institutions ultimately increases borrowing rates for consumers and businesses. Companies with sizable debt, such as Sirius XM, risked higher debt-servicing costs.

Secondly, Sirius XM has been held down by economic uncertainty. As a company that derives some of its revenue from advertising (through Pandora), there's been concern that ad demand will weaken as the unemployment rate creeps up. Most radio operators are closely tied to the health of the U.S. economy.

The third factor that's weighed on Sirius XM stock is the modest decline that's been observed in its satellite radio subscriptions. This drop can be attributed to the competitive nature of the radio/online streaming industry and to weaker U.S. auto sales over the last year. Sirius XM relies on promotional subscriptions tied to new-vehicle sales to convert to self-pay subscribers. A drop in vehicle sales translates to fewer opportunities for Sirius XM to make this conversion.

Image source: Getty Images.

The Oracle of Omaha couldn't stop buying shares of this legal monopoly

While Sirius XM is clearly navigating through some choppy waters, this didn't stop investing legend Warren Buffett from piling in before he retired. By the time the Oracle of Omaha had handed over the reins to successor Greg Abel, Berkshire Hathaway had built up a roughly 124.8-million-share stake in Sirius XM Holdings, equating to more than 37% of the content giant's outstanding shares.

The initial attraction to Sirius XM likely stemmed from its legal monopoly status. Even though it's contending with several major competitors for listeners, including Spotify Technology and Apple Music, it's the only operator with satellite-radio licenses. This should afford Sirius XM relatively solid pricing power with its 33 million subscribers.

However, the company's revenue mix may offer an even bigger sustainable advantage.

For most traditional radio operators, advertising accounts for the bulk of their revenue. Since economic cycles aren't linear -- periods of growth last substantially longer than recessions -- ad-driven operating models tend to be successful over long periods. But when recessions do occur, it can spell trouble for traditional radio operators.

Sirius XM's revenue mix virtually eliminates this concern. Through the first nine months of 2025, it generated approximately 20% of its net sales from advertising on Pandora, with 76% of its net revenue derived from its satellite-radio subscriptions. Subscribers to its services are less likely to cancel than businesses are to pare back their marketing budgets during periods of economic uncertainty. This should lead to steadier operating cash flow in any economic climate.

At the other end of the spectrum, Sirius XM offers a somewhat more predictable cost structure than traditional radio operators. Although its royalty and talent acquisition costs are likely to fluctuate from one quarter to the next, its transmission and equipment costs are more or less fixed. No matter how many subscribers the company has, these costs tend to stay the same. Predictability is something Warren Buffett and most investors appreciate.

Sirius XM also offers an impressive capital-return program. In addition to a steady share-repurchase program, Sirius XM's dividend yield is now up to 5.3%. While Sirius XM doesn't raise its dividend regularly, its payout appears to be safe and is nearly five times higher than the average yield of the S&P 500.

Above all else, Sirius XM is historically cheap amid an expensive stock market. Shares can be purchased right now for just 6.6 times forecast earnings per share in 2026. This represents a 45% discount to its average forward price-to-earnings ratio over the last five years, making Sirius XM stock nothing short of a screaming buy in 2026.

Sean Williams has positions in Sirius XM. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Spotify Technology. The Motley Fool has a disclosure policy.