Warren Buffett Appropriate has added $94 million to this longtime staple, up more than 325% since he first bought the stock

Warren Buffett hasn’t seen stacks to admire in the stock market in a while. The Berkshire Hathaway The CEO sold additional shares from the conglomerate’s investment portfolio than he has added in each of the last eight quarters. Sales accelerated to $133 billion in 2024 on a nine-month basis. Next month we will collect the full annual change.

One of the most glaring challenges facing Buffett is that the sheer size of Berkshire Hathaway’s portfolio limits his investment universe. It can’t make well-known investments in small-cap companies — the volumes involved would no longer move the needle for well-known Berkshire, even if such a stock were to rise. And for the reason that most of the bright companies where Berkshire happens to be able to supposedly deploy the most capital have additionally turned into some of the most expensive in terms of valuation, Buffett wouldn’t have some enticing alternative suggestions. Still, his most recent Securities and Commerce Price disclosure shows he has found a package to invest nearly $100 million of additional Berkshire cash.

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Buffett first invested in Verisign (NASDAQ: VRSN) in 2012, and at the time of this writing, the stock is up at least 325% since then. He persisted in acquiring shares in 2013 and 2014, but it has undoubtedly been more than 10 years since he added a task. Here’s why it’s now coming to Verisign’s rescue.

Image Credit: The Motley Fool.

Net monopoly

Verisign owns the unusual rights to register websites with the .com and .fetch TLDs granted by the Net Corporation for Assigned Names and Numbers, or ICANN. Its monopoly over essentially the smartest – most standard domain names is most easily limited by the tag extension restrictions built into its contracts. His recent contracts allow him to incur fees of 7% and 10% per year respectively for .com and .fetch domain names for two years after each contract is signed.

Verisign must periodically renew its contracts with ICANN, however, these renewals are computerized as long as it meets certain requirements. Verisign has to pay a price to ICANN, manage a serious network infrastructure, and present companies with a continuous Domain Address System (DNS). He’s managed to maintain his low-cost waiver for 27 years, and there’s no indication that he can’t presumably be willing to continue doing so for several more years to almost help.

As a result, Verisign was willing to gradually increase its costs, resulting in regular income and revenue moving forward over time. Verisign has grown its revenue by more than 50% over the past 10 years as it has increased costs and the need for registered domains. Because the industry is highly leveraged, earnings on the acquisition increased by an even earlier 146% during this time.

While more modern top-stage domains have entered the market, the question behind .com and .fetch domains remains precise. Most companies are no longer willing to compromise with their online image, and .com carries an air of professionalism that others no longer do. While Verisign’s domain name has fallen woefully short in 2024, there is little chance that other domain names will drain its core buyer. In the five years leading up to September, combined demand for .com and .fetch domains was up 7.8% once.

Looking to diversify its DNS businesses with steady revenue growth and low capital expenditures, Verisign has been increasing its free cash flow. It returns capital to shareholders by repurchasing fragments, and as a result its earnings per share have grown significantly faster than its income. Shareholders, including Berkshire Hathaway, saw the benefits.

Why Buffett Is Buying Right Now

Although the company has regularly grown revenue and earnings per share, Verisign stock has essentially moved sideways in most segments over the past 5 years. This is likely due to concerns that regulatory stress could accidentally engulf his supposedly monopolistic industry. The incoming Trump administration is no longer likely to set any additional guidance for Verisign, despite the stock trading quietly at some unspecified time in the future for the same mark as it did in early 2020.

In short, after 5 years of steady industry progress, Verisign’s valuation looks attractive. Even after a sharp rally following news of Buffett’s latest acquisition, the stock trades for about 24 times analysts’ 2025 earnings expectations. That’s good pay for a rich industry with a clear plan for revenue growth, known operating leverage and a stock buyback program , which increases the value of future earnings for shareholders.

Buffett’s smartest problem remains his willingness to invest, and he’s known to want to invest in stocks he thinks are smart. Berkshire already owns 13.8% of Verisign, and its market capitalization of $20.3 billion makes it difficult for Buffett to invest hundreds of millions of greenbacks. However, by chance, retailers may presumably not bother to buy as much stock as they need for this net monopoly.

You can casually put $1,000 into VeriSign on a good chance, right?

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Adam Levy has no delinquent in any of the shares mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and VeriSign. The Motley Fool has a disclosure policy.

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