Warren Buffett’s investment firm, Berkshire Hathaway (BRK-A, BRK-B), has once again shown its confidence in VeriSign (VRSN) by increasing its stake in the internet domain services provider, Business Insider reports. Recent filings with the Securities and Exchange Commission indicate that Berkshire Hathaway has acquired an additional 143,424 shares over three trading sessions, culminating in a total purchase of 377,736 shares for approximately $74 million over six trading sessions ending December 24. This move brings Berkshire’s total holding to 13.2 million shares, valuing their investment at about $2.7 billion, making them the largest shareholder of VeriSign, a company established in 1995.
VeriSign’s stock briefly surged nearly 2% following the announcement, hitting its highest level since late January. However, the rally was short-lived, with the stock settling at $203.95 — a 0.60% gain — amid a broader market sell-off. Despite this, interest from a high-profile investor like Buffett highlights VeriSign’s enduring appeal in an otherwise volatile market.
Berkshire’s familiarity with VeriSign dates back over a decade to when it first invested in the company in 2012. This long-term interest might be driven by VeriSign’s robust financial health. Notably, in the latest financial data, VeriSign ranks fifth in the S&P 500 (SPX) for profit margins – which represents the percentage of revenue a company retains as net income after accounting for all expenses – matching Nvidia (NVDA) with a 55.74% margin. Furthermore, it holds the third position for operating margin – 51.24%, as of Sept. 30, 2024 – and thirteenth for gross margin, 87.61%, highlighting its efficiency and profitability in the sector.
This investment comes at a time when VeriSign’s stock has not participated in the broader market’s 25% rally this year, remaining down by about 1% year-to-date and 20.28% off its $255.93 peak from Dec. 29, 2021. This discrepancy might suggest that Buffett sees VeriSign as undervalued or possessing significant potential for future growth, particularly given its high-profit margins and pivotal role in internet infrastructure.
The decision to ramp up its investment in VeriSign, despite the company’s stock lagging behind the market, reflects Buffett’s strategy of investing in companies with strong fundamentals that are poised for long-term success rather than short-term market performance.
This purchase by Berkshire Hathaway not only underscores confidence in VeriSign’s business model but also sends a signal to the market about the perceived value and stability of companies with high-profit margins and essential services in the digital economy.
Leave a Reply