Berkshire Hathaway owns dozens of stocks. But Sirius XM (SIRI 1.13%) is an under-the-radar business that has popped up in the portfolio in a meaningful way in the past year. The Warren Buffett-led conglomerate owns a whopping 35% of the outstanding shares, which at least warrants a closer look from the average investor.

But given that this media stock has shed 65% of its value in the past five years, you might be wondering about the investment case. Maybe this is a diamond in the rough. Could buying Sirius XM today set you up for life?

Unique competitive position

Investors who want to own businesses for the long haul should look for the presence of an economic moat. A durable competitive advantage can help defend a certain company from the threat of existing rivals and new industry entrants. Sirius XM fits the bill.

It is the only satellite radio provider in the U.S., with a legal monopoly over the industry. In other words, there is not going to be another satellite radio provider that enters the market, protecting Sirius XM's foothold in the industry.

However, technology finds a way to make an impact. The rise of services from the likes of Apple and Spotify, for example, coupled with the fact that today's new vehicles are built to be compatible with smartphones, means Sirius XM faces stiff competition. People can simply just plug in their devices and consume whatever entertainment they want.

It's not a shocker that this poses a headwind for Sirius XM's efforts to drive substantial user growth. While its subscriber base of 31.6 million (as of Dec. 31) declined 1% year over year in 2024, it's actually 5% higher than it was at the end of 2019. Though this isn't necessarily anything to write home about.

Sirius XM also has pricing power, as its average revenue per user is up 10% in the past five years. Buffett has said that the ability to successfully raise prices is a sign of a great business. Perhaps this important trait is what draws Berkshire's attention the most when looking at Sirius XM.

Generating lots of cash

Despite the valid argument that Sirius XM is a no-growth business, it throws off lots of cash. In 2024, the company generated just over $1 billion of free cash flow (FCF) on $8.7 billion of revenue. That's after raking in almost $1.2 billion in 2023. And in 2027, executives believe FCF will total $1.5 billion. Even though the customer base shrank last year, Sirius XM is in a favorable position to continue hearing the cash register ring.

Here's where the leadership team's capital allocation policy plays a crucial role. The stock's current dividend yield is a hefty 4.48%. The quarterly payout has more than doubled in the past five years. Income investors might be drawn to this.

Management is also focused on cleaning up the balance sheet. In the past 24 months, $3.8 billion was spent on repaying debt.

And share repurchases are on the table. "As we look ahead to 2025, we plan to remain opportunistic with share buybacks," CFO Tom Barry said on the Q4 2024 earnings call.

Should you buy Sirius XM shares?

Investors should first temper their expectations. We all want to find stocks that can generate life-changing returns, but this is wishful thinking. It's best to keep a diversified portfolio.

However, even if a stock isn't likely to set you up for life, it might still be a worthy investment candidate. Sirius XM looks like an interesting stock to own. Its moat, capital returns, and the fact that Berkshire Hathaway is a big shareholder are notable.

So is the current forward price-to-earnings ratio of 7.9. Low starting expectations could lead to adequate returns over the next few years.