Trade decisions of huge fund managers such as Berkshire Hathaway Inc. (NYSE:BRK.A) always make heads turn. I am turning mine today to the recent moves of this giant firm based on its first quarter 13F filing. The biggest buys include Liberty Capital, Wells Fargo & Co (NYSE:WFC), Chicago Bridge & Iron Company N.V. (NYSE:CBI), and Verisign, Inc. (NASDAQ:VRSN). In spite of the significant lag between the filing date and the period concerned, such filings nevertheless offer ideas as this evaluation is based on current metrics. Here is a quick analysis from a fundamental perspective to see whether these are worth checking or not.
Liberty Media: stake in Sirius XM pays off
The communications, media, and entertainment company is one of Berkshire Hathaway Inc. (NYSE:BRK.A)’s big buys in the latest quarter. Liberty Media is a majority investor in the satellite radio company Sirius XM Radio Inc (NASDAQ:SIRI). The company, through its leader John Malone, announced buying a 27% stake in Charter Communications last March. Heads were turning recently as investors smell a looming merger with the reported talks of Liberty Media and another cable player, Time Warner Inc. (NYSE:TWX), about the latter being acquired by Charter Communications. Also, Malone’s Liberty Global has reportedly offered a bid for Kabel Deutschland, the biggest cable operator in Germany. Wherever the talks or offers are headed, the geniuses at Berkshire Hathaway Inc. (NYSE:BRK.A) are likely to have seen these coming.
With or without the merger, there are several reasons to stick with this company. For one, it posted a huge positive EPS surprise in the latest quarter. This comes from its over 2,000% quarterly revenue growth. It is also important to assess Liberty Media by looking at the bulk of its portfolio. Sirius XM Radio Inc (NASDAQ:SIRI) is itself achieving consistent growth. Since 2012, the radio company has been continuously raking double-digit quarterly revenue growth. Moreover, its profit margin of 13.77% for the quarter ending March is slightly higher than that for the same period last year. Based on Finviz data, Sirius XM Radio Inc (NASDAQ:SIRI)’ EPS is expected to grow at an average rate of 29% each year for the next five years. This proves that Liberty Media's stake is worth the investment. Whether its portfolio further strengthens in the future is what investors must closely pay attention to.
Wells Fargo: strong earnings continue
The hedge fund also bought an additional $677 million worth of shares in Wells Fargo & Co (NYSE:WFC). Even with the strong and consistent growth that has been anticipated by analysts, the bank showed it could do more. Hence, it surpassed at least the four most recent EPS estimates. In terms of revenue, although it has failed to grow in the latest quarter vis-à-vis that for the same quarter last year, the prospects remain huge. In fact, it has gained three upward revisions, with no downward ones, for its June 2013 EPS.
If there is one thing that concerns me, it’s the fact that the bank may not be able to sustain its outstanding dividend performance in the long run because of its weak operating cash flow. However, in a broader view, the positive outlook earlier mentioned and its continuing efficiency can outweigh this. Wells Fargo & Co (NYSE:WFC) is impressively growing its earnings through its expanding profit margins. In the quarter ending in March, its net profit margin was at 24.32%, way above that for the same period last year at 19.63%. Meanwhile, the bank’s P/E ratio of 11.60 is below that of its competitors Citigroup Inc (NYSE:C) (17.23) and Bank of America Corp (NYSE:BAC) (39.66) and the industry’s 22.17, but above JPMorgan Chase & Co. (NYSE:JPM)’s 9.28. Given this relatively lower pricing, the room for appreciation in the future is very likely.
Chicago Bridge & Iron: a bright future ahead
Berkshire Hathaway Inc. (NYSE:BRK.A) bought over $400 million worth of shares in Chicago Bridge & Iron Company N.V. (NYSE:CBI). What strikes me most about this company is the bright future that analysts have seen. This energy infrastructure company’s EPS is estimated to grow at an annual rate of 21.63% in the next five years. It has already put on a great show by surpassing EPS expectations in at least the last four quarters, including its strong revenue growth, at 87.42%, in the latest quarter. In fact, the company’s revenue has been growing at a double-digit rate since the second quarter of 2011.