MW Warren Buffett is buying up stock in this high-margin, internet registry company

By Tomi Kilgore and Philip van Doorn

Buffett's Berkshire Hathaway is the largest shareholder of VeriSign, which ranks highly among S&P 500 companies in terms of gross and operating margins

Warren Buffett's Berkshire Hathaway Inc. has been busy over the past week buying stock in an internet domain-name registry company, to extend its lead as the company's largest shareholder.

In a Form 4 filing with the Securities and Exchange Commission late Thursday, Buffett and Berkshire disclosed that Berkshire spent $28.55 million to buy a total of 143,424 shares of VeriSign Inc. $(VRSN)$ over the three sessions that ended Dec. 24.

In total, over the six sessions to Dec. 24, Berkshire bought 377,736 VeriSign shares for $73.95 million, which implies a weighted-average price for the purchases of $195.78.

That boosted Berkshire's stock in VeriSign to 13,193,349 shares, or 13.7% of the shares outstanding. At Thursday's closing prices, that stake was valued at $2.67 billion.

Berkshire's 13F disclosures of its equity holdings show that it started buying VeriSign stock in the first quarter of 2024, as it held 12,815,613 shares as of March 31. The holding remained unchanged until the recent purchases.

VeriSign's stock slipped 0.2% in morning trading Friday, to reverse earlier intraday gains of as much as 1.7%. It was in danger of snapping a five-session win streak.

A reason for Buffett's interest could have to do with the fact that an analysis by MarketWatch's Phil van Doorn shows that among S&P 500 companies, VeriSign ranks very high in various margin measures.

Gross margin is gross profit, which is net sales minus the cost of goods sold, divided by sales, and is used to measure a company's pricing power. Operating margin can be summarized as earnings before interest and taxes, divided by sales. Net income margin is net income divided by sales.

For VeriSign's third-quarter, gross margin of 88.02% ranked 11th, operation margin of 71.25% was ranked sixth and net income margin of 51.54% ranked seventh. And all three margin measures showed improvement from a year ago.

VeriSign made it's name during the internet boom of the late-1990s, as it was the go-to place to register a website's domain names. Its domain-names end with dot-com, dot-net, dot-cc and dot-'name.'

The stock went public on Jan. 30, 1998, and closed its first day at a split-adjusted $6.38. It rose 131.7% the rest of that year, then skyrocketed a record 1,191.8% in 1999 before peaking at a pre-internet bubble bursting closing high of $253 on Feb. 29, 2000.

The stock surpassed that high in 2021, with a current record close of $255.93 on Dec. 29 of that year.

The stock was recently trading 20.9% below that record price, and has declined 1.7% year to date.

Of the six analysts surveyed by FactSet who cover VeriSign's stock, half are bullish and half are neutral. The average stock price target is $230, which implies 13.6% upside from recent prices.

The FactSet consensus for 2024 earnings per share is for a rise to $7.99 from $7.90 in 2023, and the consensus for 2025 is for growth to $8.55. Sales are expected to rise 4.2% to $1.56 billion in 2024, and then increase 3.2% in 2025 to $1.61 billion.

-Tomi Kilgore -Philip van Doorn

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December 27, 2024 10:43 ET (15:43 GMT)

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