This is one part of a three part series about less known public stock holdings of Mr. Buffett and Mr. Munger. You can find the other two parts here.
In this series of articles I will present to you the lesser known holdings of Berkshire Hathaway (BRK.A, BRK.B) as they can be found in the company's fillings and I will provide you with the following information.
- What is the business of each company.
- What is its competitive advantage (i.e. what's the reason Berkshire bought them).
- What is the state of the company's valuation (is it cheap or expensive).
My purpose is to provide some investing ideas and some companies that are worth watching in case they become cheap enough to buy. I hope you'll find the information provided here useful.Starz (STRZA, STRZB)
From Yahoo! Finance:
Starz, through its subsidiaries, operates as a media and entertainment company worldwide. It provides premium subscription video programming services to multichannel video distributors, including cable operators, satellite television providers, and telecommunications companies.[...]
The company also develops, produces, acquires, and distributes entertainment content to consumers on DVD, digital formats, and traditional television.
In addition, the company develops and produces two-dimensional animated content for distribution theatrically and on television for various third party entertainment companies, such as for studios, networks, distributors, and audiences.
The company was formerly known as Starz, LLC and changed its name to Starz in January 2013. Starz is based in Englewood, Colorado.
The company is a content provider and the only moat it has is the degree of loyalty (and ratings) people show when they are watching one of Starz's 18 channels.
Valuing Starz seems cheap at $24 or 13 times its expected 2013 EPS but it is a highly volatile business with many ups and downs. This may be an opportunity but you should tread carefully.
Berkshire Hathaway as of March 31, 2013 owned 5.6 million shares
From Yahoo! Finance:
VeriSign, Inc. provides Internet infrastructure services worldwide. It offers registry services that operate the authoritative directory of .com, .net, .cc, .tv, and .name domain names, as well as the back-end systems for various .gov, .jobs, and .edu domain names. The company also provides network intelligence and availability services that provide infrastructure assurance to organizations comprising VeriSign iDefense Security Intelligence Services, Managed Domain Name System Services, and Distributed Denial of Service Protection Services. VeriSign, Inc. was founded in 1995 and is headquartered in Reston, Virginia.
VeriSign's moat is the long-term contracts it has signed for exclusive rights to manage .com, .net and other domain names.
VeriSign is trading at $47 which is 20 times its expected 2013 earnings. It seems expensive but one has to keep in mind that it has extremely volatile results and that there could go either way.
Berkshire Hathaway as of March 31, 2013 owned 8.17 million shares
Wabco Holdings (WBC)
WABCO Holdings Inc., together with its subsidiaries, provides electronic, mechanical, and mechatronic products for commercial truck, trailer, bus, and passenger car manufacturers worldwide. The company develops, manufactures, and sells braking, stability, suspension, and transmission control systems primarily for commercial vehicles.
The company was founded in 1869 and is headquartered in Brussels, Belgium.
The parts that Wabco makes for cars, trucks and buses are a small part of the overall cost of the vehicle but they are also the ones that must be 100% reliable and failure-free. This and the patents that Wabco has makes the company a must have supplier for auto manufacturers, giving Wabco stable business and pricing power.
At $76 per share the stock is trading at just 14 times its expected 2013 EPS of $5.47. And I say "just" because the company has grown its earnings at an average 20% annual rate over the last 5 years and will probably continue to grow at least at a 15% rate. The company seems fair priced to undervalued right now and with a small 10% correction it could probably become a good buy.
Berkshire Hathaway as of March 31, 2013 owned 4 million shares