Warren Buffett and his company, Berkshire Hathaway, have made a name for themselves by generating great returns for decades. Between 1965 and 2023, Berkshire’s stock has grown 4,384,748%, equating to compound annual gains of 19.8%. The S&P 500 has generated an overall gain of 31,223%, or a compound annual gain of 10.2% including dividends.
This is why so many investors follow Buffett and Berkshire’s moves so closely. As we head into year-end, here are two Warren Buffett stocks to buy hand over fist in December. Berkshire has been buying Sirius XM Holdings all year and is now the company’s largest shareholder.
Sirius has been through many changes this year. The company recently split off from Liberty Media and conducted a reverse 1-for-10 stock split. The stock is down more than 50% this year, struggling from a high debt load and a decline in paying subscribers.
However, Sirius continues to focus on growing its subscription business. The company has paid big bucks to obtain exclusive distribution and advertising rights for podcasts with large audiences. In the third quarter, Sirius added about 14,000 subscribers for a total of 37.4 million, including both Sirius XM and its sister platform, Pandora.
It also grew podcast ad revenue by 6%. The company’s long-term goal is to grow subscribers by 25% from 2023 and reach 50 million while increasing free cash flow (FCF) by 50% to $1.8 billion.
Invest in Sirius and Citigroup
Higher FCF will allow the company to do things like pay off debt, repurchase shares, and increase the dividend. The stock trades below 8 times earnings and has a dividend yield close to 4%. Buffett has long been a fan of bank stocks.
Berkshire sold many of its bank stocks during the pandemic and has been selling chunks of its large stake in Bank of America all year. However, it has maintained its nearly 3% stake in Citigroup, which consumes 1.3% of Berkshire’s $300 billion-plus equities portfolio. Citigroup has struggled since the Great Recession and recently has been dealing with a frustrated shareholder base, an overly complex bank, and consent orders regarding the company’s internal controls.
CEO Jane Fraser took the helm of the bank in 2021 and has already accomplished a lot, including selling off most of Citigroup’s international consumer franchises. Citigroup is still working on exiting Banamex, its highly profitable consumer franchise in Mexico. Citigroup already holds a lot of excess capital but can lower its capital position over time as bank regulatory capital rules are finalized and as the regulatory landscape gets easier for banks.
Citigroup is already repurchasing shares, a move that is extremely accretive while the stock trades below tangible book value (TBV) or its net worth. The stock trades close to $71 and tangible book value is already close to $90, so a 1.25 TBV valuation results in a $113 stock price. Management can increase TBV through more repurchases while the stock trades under TBV.
Citigroup also has over a 3% dividend yield. These picks highlight why following Buffett’s moves is often a prudent strategy. As always, do your own research and consider your financial situation before making any investment decisions.
