2 Warren Buffett Stocks That Can’t Be Stopped and Are Screaming Buys for the Rest of 2024 (and Beyond)

For most of the last six decades Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett uses Wall Street’s broadest index, i.e S&P500. While the S&P 500 has delivered a total return, including dividends, of around 38,000% since the mid-1960s, the aptly named “Oracle of Omaha” has overseen a cumulative return on his company’s Class A stock (BRK.A) of $5,544,952 % from the closing bell on September 27.

Warren Buffett is generally an open book and has been eager to share the qualities he looks for when investing in so-called “great companies.” For example, it tends to focus on profitable, proven businesses with sustainable competitive advantages and solid management teams.

Additionally, most of the 43 stocks in Berkshire’s roughly $315 billion investment portfolio pay dividends.

Warren Buffett, CEO of Berkshire Hathaway. Image Source: The Motley Fool.

But no two Buffett stocks are the same. As we enter the fourth quarter of 2024, two unstoppable stocks in Berkshire’s $315 billion portfolio stand out as compelling buys – and will likely remain so for the foreseeable future.

Sirius XM Holdings

Buffett’s first great stock to buy in Q4 (and beyond) without hesitation is satellite radio operator Sirius XM Holdings (NASDAQ: SIRI).

Sirius XM could represent an intriguing arbitrage opportunity for the Oracle of Omaha and his investment team.

In December 2023, Sirius XM revealed plans to merge with Liberty Sirius XM Group, the Sirius XM tracking company owned by Liberty Media. Liberty Media was Sirius XM’s largest shareholder by a mile, and the various classes of tracker companies (Berkshire Hathaway owned shares of two of those three classes) were often valued at staggering discounts to Sirius XM’s share price.

Combining the stock into one class after the closing bell on September 9 and performing a 1-for-10 reverse stock split to make the stock more attractive to institutional investors could be the bait that gets Buffett and his vice-investors Todd Combs and Ted Weschler they found tempting.

But there’s much more to appreciate about Sirius XM Holdings than just its simplified share structure and the prospect that institutional investors will find it more attractive after a unique split.

For example, it is the only licensed satellite radio operator. While this does not mean it is free from competition, being a legal monopoly gives the company a strong position in setting subscription prices. WITH Spotify technology recently raising subscription costs, Sirius XM has a great opportunity to follow suit and increase its sales in the near future.

Unlike traditional radio operators, Sirius XM also has a relatively transparent and predictable cost structure. While royalties and talent acquisition expenses will fluctuate from quarter to quarter, broadcast and equipment costs remain essentially unchanged. If Sirius XM is able to grow its subscriber base over time, some of its spending should remain flat and provide an opportunity for margin expansion.

However, the biggest competitive advantage Sirius XM offers is revenue diversity. Advertising accounts for the majority of revenues generated by terrestrial radio and internet service providers. For Sirius XM, advertising revenue through Pandora, which it acquired in February 2019, accounts for just under 20% of its net sales.

Long-term economic expansion tends to help advertising-driven companies. But when a recession hits, ad-based radio providers face serious difficulties. Because Sirius XM generates approximately 77% of its net sales from subscriptions, operating cash flow is much more predictable and less susceptible to wild fluctuations during economic downturns.

What makes Sirius XM such a screaming buy is its pricing. The company’s forward price-to-earnings (P/E) ratio of 7.5 is roughly the lowest level on record since the company went public 30 years ago. Choose an annual rate of return of 4.4% and you will receive a unique opportunity!

Image source: Getty Images.

Visa

Warren Buffett’s second can’t-hold stock and should be a strong buy for the rest of 2024 (and beyond) is payments processor Visa (NYSE:V).

Last week, the Visa case made headlines for all the wrong reasons. According to reports, the country’s leading payment processor will be sued by the US Department of Justice for violating antitrust laws due to its dominance in the debit card market. While Visa has denied any wrongdoing, legal issues may weigh on sentiment in the near future.

A potential Justice Department antitrust lawsuit has sparked yet another price change that investors shouldn’t overlook.

While the Department of Justice focuses on Visa’s debit card operations, Visa is also a powerhouse when it comes to processing credit transactions. According to eMarketer data, the country’s volume of credit card purchases through Visa was $6.45 trillion in 2023, more than doubling from $2.73 trillion to $2.73 trillion. MasterCard supported. Being the leading payment processor in the world’s #1 consumer market isn’t a bad thing.

But the visa also creates enormous opportunities beyond national borders. There has been consistent double-digit growth in cross-border payment volumes, reflecting the chronic underbanking of most of the fastest-growing emerging markets. Visa has deep enough pockets and strong enough cash flow to organically enter these markets and will, at times, rely on acquisitions to expand its reach (e.g. the purchase of Visa Europe in 2016).

While this is a subtle difference from some competitors, Visa has avoided becoming a lender. The ability to double profits and generate fees from merchants and interest income/fees from cardholders has grown in popularity American Express higher for several decades. However, lending also exposes AmEx and its competitors to loan defaults and loan losses during economic downturns. Because Visa is not a lender, it is not required to set aside capital to cover loan losses, which is a subtle but important competitive advantage.

Time is also on Visa’s side. It is a highly cyclical company that benefits from increases in consumer and business spending during long periods of economic expansion. Although recessions are a completely normal and inevitable part of the economic cycle, historically they are short-lived. Patience has paid off for Visa shareholders since it went public in March 2008.

The final piece of the puzzle that makes Visa a definite buy is, of course, its historically low valuation. The shares can be purchased now at a price not exceeding 25 times next year’s earnings per share, which represents a 13% discount to the average P/E ratio over the next five years.

Moreover, with the exception of a brief COVID-19 crash in February and March 2020, Visa has not been cheaper over the past half a decade. That’s what makes these market-leading Buffett stocks a definite buy.

Is it worth investing $1,000 in Sirius XM now?

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American Express is an advertising partner of The Ascent, a Motley Fool company. Sean Williams holds positions at Mastercard, Sirius XM and Visa. The Motley Fool ranks and recommends Berkshire Hathaway, Mastercard, Spotify Technology and Visa. The Motley Fool has a disclosure policy.