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$Sirius XM (SIRI.US)$ Despite being a big seller of stocks for two years, the Omaha Prophet still managed to uncover at least one value stock.

Following the detailed explanation of Bank of America's selling activity since mid-July in 15 separate Form 4 filings, investors learned about a Form 4 filing on October 11th detailing the buy activity of satellite broadcasting operator Sirius XM Holdings (NASDAQ: SIRI). Berkshire's most astute investors spent $86.7 million buying an additional 3,564,059 shares of stock from October 9th to October 11th, increasing their ownership stake in the company to 32.1%.

This year has undoubtedly been a challenging one for Sirius XM, facing the issue of declining satellite broadcasting users for two consecutive quarters. The company relies on strong auto sales and three-month satellite radio promotional offers accompanying these sales to convert promotional listeners into self-paying users. If auto sales fail to impress, Sirius XM may struggle to convert promotional listeners into paying users.

However, Sirius XM does have many clear competitive advantages and historically low valuations that the Oracle of Omaha cannot resist.

A defining feature of Sirius XM is that it is one of the few legitimate monopoly enterprises in public trading in the USA. While being the only licensed satellite broadcasting operator does not mean the company has no competition, it does bring significant pricing power. In other words, Sirius XM can raise its subscription prices to ensure it can surpass inflationary pressures.

Not just a legal currency monopoly, Sirius XM differs from traditional broadcasting operators in several key ways.

Firstly, nearly all revenue of online and terrestrial broadcasters comes from advertisements. Meanwhile, as of the first half of 2024, 77% of Sirius XM's net sales come from subscriptions, about 19% from advertising. A predominantly subscription-based model brings more stable operational cash flow, which should provide Sirius XM with a good buffer during short economic downturns, unlike traditional broadcasting companies.

Sirius XM also enjoys a certain degree of cost predictability, which terrestrial broadcasting operators do not. While licensing fees and talent acquisition costs may fluctuate from one quarter to the next, transmission and equipment costs largely remain static, regardless of how many subscribers the company adds. Ideally, this should lead to expanding long-term profit margins.

Apart from the existing $1.17 billion share buyback authorization by the board, the company also issued a 3.9% yield, far exceeding the S&P 500 index.

Clearly, the final piece of the puzzle that prompted Buffett to buy a large amount of stocks in this legal monopoly enterprise was its valuation. When Buffett bought Sirius XM stocks last week, its P/E ratio was only 7 times, the lowest price since the company went public 30 years ago.

Warren Buffett really likes inexpensive, well-established, and sustainably moated companies - which is exactly what he found in Sirius XM.