However, smart capital allocation more than makes up for DirecTV’s relative premium. Its pre-tax return on tangible invested assets is consistently higher than Time Warner Cable Inc (NYSE:TWC)’s — and it will continue to earn a higher return than DISH Network Corp. (NASDAQ:DISH) as the two companies’ investment strategies send the metric in different directions. While DISH invests in the low-return U.S. market, DirecTV will continue to be a good steward of shareholder wealth by investing cash in the high-growth Latin American market.
DIRECTV (NASDAQ:DTV) is reaping huge rewards from its first-mover advantage in Latin America. Despite its early success in the region, DirecTV’s peers have stubbornly insisted on re-investing in the U.S. market. As a result, they will most likely wither and die along with the domestic market.
DirecTV is poised for decades of success as it accumulates customers in Latin America. In order for the investment to work out, the company only has to grow its Latin American operations at a faster rate than its U.S. business declines. It looks like it can do that at least for the next several years, which is why Ted and Todd keep buying shares of the company.
The article Berkshire Hathaway Keeps Buying This Stock originally appeared on Fool.com and is written by Ted Cooper.
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