Warren Buffett and Billionaires Are Crazy About These 7 Stocks

3. DirecTV (DTV): Warren Buffett had nearly $2 billion in the stock and he profited handsomely as the stock is now being acquired by AT&T (T). John Paulson initiated a $850 million position in the stock probably as part of a merger arbitrage bet. Warren Buffett started buying DirecTV in the middle of 2011 when the stock was trading below $50. Buffett didn’t explain why he was buying the stock but another billionaire, Mason Hawkins, explained why he was bullish on the stock around the same time in his investor letter:

“Based in El Segundo, DIRECTV is the largest satellite broadcaster in the U.S. and has dominant market share in Latin America. Domestically the company offers unique technology and programming that attract high-end customers with little churn. In Latin America, most countries have no alternative because neither cable nor fiber have been
or will be laid where there is minimal infrastructure. The market puts a low growth multiple on the entire earnings stream, not accounting for the more valuable emerging
market growth. Additionally, SAC (subscriber acquisition cost) is counted against earnings rather than being treated as discretionary capex that provides a return via revenues over multiple years. The stock trades below 70% of our appraisal, and Mike White has done a tremendous job building value by using the substantial cash coupon to buy in shares aggressively at deeply discounted levels. The free cash flow yield based on 2012 expected FCF is 10.3%.”