Published on July 3rd, 2022 by Felix Martinez
Berkshire Hathaway (BRK.B) has an equity investment portfolio worth more than $360 billion as of the end of the 2022 first quarter.
Berkshire Hathaway’s portfolio is filled with quality stocks. You can ‘cheat’ from Warren Buffett stocks to find picks for your portfolio. That’s because Buffett (and other institutional investors) are required to periodically show their holdings in a 13F Filing.
You can see all Warren Buffett stocks (along with relevant financial metrics like dividend yields and price-to-earnings ratios) by clicking on the link below:
Free Excel Download: Get a free Excel Spreadsheet of all Warren Buffett stocks, complete with metrics that matter – including P/E ratio and dividend yield. Click here to download Buffett’s holdings now.
Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.
As of March 31, 2022, Buffett’s Berkshire Hathaway owned just over 2.63 million shares of Liberty Latin America (Series A) (LILA) and 1.28 million shares of Liberty Latin America (Series C) (LILAK) for a total market value exceeding $31 million. Liberty Latin America currently constitutes over 0.01% of Berkshire Hathaway’s investment portfolio.
In this article, we’ll thoroughly examine Liberty Latin America’s prospects as an investment today.
Business Overview
Liberty Latin America is a leading communications company operating in over 20 countries across Latin America and the Caribbean under the consumer brands VTR, Flow, Liberty, Más Móvil, BTC, and Cabletica. The company’s communications and entertainment services to its residential and business customers in the region include digital video, broadband internet, telephony, and mobile services.
LILA business products and services include enterprise-grade connectivity, data center, hosting, managed solutions, and information technology solutions with customers ranging from small and medium enterprises to international companies and governmental agencies. In addition, Liberty Latin America operates a subsea and terrestrial fiber optic cable network that connects approximately 40 markets in the region.
Liberty Latin America has three separate classes of common shares, which are traded on the NASDAQ Global Select Market under the symbols “LILA” (Class A) and “LILAK” (Class C), and on the OTC link under the symbol “LILAB” (Class B).
Source: Investor Presentation
On May 4th, 2022, the company reported first-quarter results for the Fiscal Year (FY)2022. For the quarter, revenue was lower than expectations by $40 million. however, year-over-year revenue is up 5% from $1,165 million to $1,219 million.
Operating income was up 4% for the quarter compared to the first quarter of 2021.
The company reported a record mobile postpaid growth, which grew its fixed subscriber base. The mobile postpaid additions were over 120,00 new subscribers. Net earnings were down year-over-year by 5.6%, from $89 million in 1Q2021 to $84 million in 1Q2022.
Free Cash Flow (FCF) was down $114 million versus the $58 million the company made in last year’s same period.
Source: Investor Presentation
Growth Prospects
The company has multiple avenues for growth as the Latin American market is still growing. The company can continue to grow with strategic acquisitions across different markets. For example, the company has two integration programs in Puerto Rico and Costa Rica which are on track.
Another form of growth will come from converting prepaid customers to postpaid customers. This will create a more predictable recurring revenue for the company. Postpaid customers make up 80% of the company’s revenue.
Last, the company can buy back some of its outstanding shares. The company has $170 million remaining in its buyback program after Q1.
Source: Investor Presentation
Competitive Advantages & Recession Performance
The company’s competitive advantages come from its use of capital and diversity. The company has been acquiring different companies in Latin America. This will help the company become more competitive as it can lower costs and run more efficiently.
Since the company is a telecommunication company, it should fair well during a recession. The company balance sheet has been improving in recent years. This would allow it to withstand a recession better if one were to come.
The company leverages 4.6X net earnings and 5.1X gross earnings.
Source: Investor Presentation
Valuation & Expected Returns
We expect the company to earn $0.71 per share for the year. The current price of $8.02 gives us a PE ratio of 11.3x. This looks attractive as we protect that the company will grow earnings at a CAGR of 10%-15% over the next five years.
Another note about the stock price is that the all-time low for the company is $7.01. Thus, buying at today’s price looks like an attractive deal.
The company does not pay a dividend, but we think in the future it will. But for now, the company is focusing on growth projects.
Final Thoughts
The company looks like a solid play for an investor who wants exposure to the growth of Latin America. The company has a reasonably low PE, and future growth looks promising. Overall, we rate this as a buy for investors interested in investing in Latin America.
Other Dividend Lists
Value investing is a valuable process to combine with dividend investing. The following lists contain many more high-quality dividend stocks:
- The Dividend Aristocrats List is comprised of 65 stocks in the S&P 500 Index with 25+ years of consecutive dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 38 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500. - The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.
