$500 to Invest? Here's Where Warren Buffett Would Probably Put It Right Now
Key Points
Berkshire Hathaway owns a significant portion of Sirius XM.
Sirius XM has morphed from a disruptor to a more mature operator.
It looks like a potential bargain.
- 10 stocks we like better than Sirius XM ›
One company Warren Buffett has always seen value in is Sirius XM (NASDAQ: SIRI). You can see that from Berkshire Hathaway's portfolio, as Berkshire owns slightly more than 37% of the company.
The last five years have been rough for Sirius, with shares down just under 60%. It's been a company easy to write off during that time.
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The start of 2026 is looking different, with shares climbing 27%. With a forward price-to-earnings ratio of just 8.2, it could still offer plenty of value.
Image source: Getty Images.
From disruptor to disrupted
With all the streaming services and easy access to music and podcasts today, it may be easy to forget that Sirius started as a disruptor. With its satellite radio service, it challenged the traditional radio industry, offering commercial-free music through a subscription.
That was a unique proposition at the time, but as the years went on and competition grew, the story started to change. Sirius was no longer a disruptor, and it has faced subscriber losses, climbing content costs, and declining demand as technology advances. Instead of relying on Sirius to bypass traditional radio, people can just connect their phone to their car now to listen to whatever they want.
The path forward
The good news for Sirius shareholders is that the company hasn't been sitting back and watching its market share deteriorate without taking action.
Those higher content costs may be an expense now, but they can lead to Sirius benefiting in the long run by building a strong content moat. It offers a lot of different channels for a robust experience, ranging from sports and new stations to channels dedicated to musical artists like Bruce Springsteen, Tom Petty, and the Beatles. Comedian Howard Stern and political commentator Megyn Kelly also have exclusive shows on Sirius, as well as the sports personality Stephen A. Smith.
For the financial picture, the company expects capital expenditures for its satellite and non-satellite business activities to significantly fall over the next few years. That could help free cash flow keep climbing, and Sirius expects it to reach roughly $1.3 billion in 2026 and jump to $1.5 billion in 2027.
On top of that, this Buffett stock pick pays a dividend that's yielding a hefty 4.3%. Sirius may no longer be the disruptor it used to be, but that's OK when it has so much money coming in and is paying that back out to its shareholders.
Should you buy stock in Sirius XM right now?
Before you buy stock in Sirius XM, consider this:
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Jack Delaney has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
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