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TheStreet Open House

Warren Buffett's 5 Favorite Stocks for 2013

Stock quotes in this article: DVA, DTV, STRZA, CBI, VRSN


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While DirecTV ( DTV) isn't a newly initiated position for Berkshire Hathaway, it was a major conviction buy last quarter. The firm added 3.24 million shares of DTV to its portfolio, raising its holdings in the firm by almost 10% to $2.1 billion. That increase gives Buffett's firm 6.5% ownership in the satellite TV carrier.

>>5 Dividend Stocks That Want to Pay You More

DirecTV operates the biggest satellite television network in the U.S., with close to 20 million subscribers. DirecTV also owns stakes in Latin American satellite TV providers that serve more than 11 million subscribers. There's a Starz connection here too. Both firms once fell under the Liberty Media umbrella until they were respectively spun off (LMCA, incidentally, remains a Berkshire position).

DirecTV has managed to churn out some impressive performance over the last few years. The company targets bigger spenders who spend more per household for TV services than the average. As a result, DTV gets access to ample cross-selling opportunities that dramatically widen margins. Because the firm is a satellite firm, it's also able to grow its subscriber base without having to pay the massive capital expenditures that similar fixed-line services have to shell out.

While new customer acquisitions are pricey (the firm subsidizes equipment), the road to profitability is far shorter than at rival services like Verizon's (VZ) FiOS. With impressive relative strength in play at DTV, this stock's outperformance looks likely to reverse in the near-term.

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