Warren Buffett Just Upped His Stake in This Monopolistic Tech Stock. Should You?

Core Viewpoint - Warren Buffett's recent stock selling does not preclude Berkshire Hathaway from making strategic purchases, particularly in VeriSign, which has not been added to since 2014 [1][2][3] Group 1: Berkshire Hathaway's Investment in VeriSign - Berkshire Hathaway increased its stake in VeriSign by approximately 474,000 shares, marking a 3.7% increase [2] - The last transaction involving VeriSign was a reduction of 1.1% in March 2020, making the recent purchase noteworthy [3] - The recent buy occurred at a similar price point to previous sales in 2020, but with a 20% lower share count due to share repurchases, indicating a lower market cap [4] Group 2: VeriSign's Business Operations - VeriSign operates the authoritative registry for .com and .net domain names and manages two of the 13 global root servers for the internet [5] - The company renewed contracts with ICANN and NTIA for six more years, allowing for a 7% price increase in the last four years of the contract [6][7] - This pricing strategy suggests a potential total price increase of around 30% over the next six years, which may outpace inflation [8] Group 3: Domain Registration Trends - In 2024, VeriSign experienced 4.3% revenue growth, entirely driven by price increases, while overall domain registrations fell by 2.1% [9] - Management indicated that declines in domain registrations in China may moderate, and new stimulus measures could lead to growth in that market [11] - The U.S. market, which also saw declines, may reverse in 2025 as VeriSign collaborates with registrars to enhance customer acquisition [12][13] Group 4: Future Growth Potential - Although net growth in domain names has not yet occurred, positive trends in gross additions suggest potential for recovery [14] - The post-pandemic slowdown in domain registrations is expected to eventually stabilize, leading to growth resuming around 2027 when price increases can be implemented again [15] - VeriSign's regulated monopoly supports a high-margin, cash-generative business model, which is likely to enhance earnings per share through share buybacks [16] Group 5: Stock Performance Outlook - Despite a 20% increase in stock price since Berkshire's recent purchase, VeriSign is still considered a viable long-term investment [17]