Warren Buffett’s investment firm, Berkshire Hathaway, recently made some notable additions to its stock portfolio. In the third quarter, Berkshire bought shares in four companies: Domino’s Pizza, Pool Corporation, Sirius XM Holdings, and Heico. Berkshire’s biggest new position was in Domino’s Pizza.
The firm purchased 1.28 million shares of the pizza franchiser, valued at $549.4 million at the end of Q3. Buffett or his investment managers also bought over 404,000 shares of Pool Corporation, a swimming pool supplies distributor. This stake was worth nearly $152.3 million.
Besides these new additions, Berkshire increased its existing positions in two companies. The firm’s stake in Sirius XM Holdings, a satellite radio operator, grew by 6.99%. This was partly due to the merger of Sirius XM and Liberty SiriusXM Holdings.
Berkshire also boosted its position in Heico, an aerospace and electronics company, by 0.52%. The conglomerate’s stake in Heico was worth roughly $214 million at the end of the quarter. Among these four stocks, Heico has performed the best this year with a gain of over 50%.
Berkshire investments update for Q3
Domino’s comes in second with a year-to-date return of less than 5%. Pool and Sirius XM are both down for the year, declining around 10% and 53%, respectively.
However, Sirius XM looks the most attractive from a valuation perspective. The stock trades at a price-to-earnings ratio of just 7.3. Domino’s has a forward earnings multiple of 24.3, while Pool trades at 29.8 times forward earnings. Heico is the most expensive of the bunch with a forward P/E of 63.7.
Analysts expect Sirius XM to deliver the strongest earnings growth next year at 150.9%.
Heico is projected to grow earnings by 16.8%, while Pool and Domino’s are forecast to see growth of 9.3% and 5.6%, respectively. Wall Street’s average price targets suggest Sirius XM and Domino’s both have upside potential of around 11% over the next 12 months. Analysts look for Pool’s stock to rise 6.4%, while the average price target for Heico is 2.5% below its current share price.
Income investors may find Sirius XM the most appealing, as it offers a dividend yield of 4.2%. Domino’s and Pool have forward yields of 1.4% and 1.3%, respectively, while Heico’s yield is just 0.08%. Overall, Sirius XM stands out as the best of Buffett’s recent buys for value and income investors.
The stock looks cheap relative to its growth prospects and offers an attractive dividend. However, there may be even better long-term opportunities among Berkshire’s other holdings.
