Warren Buffett Bets Big on VeriSign: High Margins and Undervalued Potential

Warren Buffett, the legendary investor and CEO of Berkshire Hathaway (BRK-A, BRK-B), has doubled down on his confidence in VeriSign (VRSN), a leader in internet domain services. Recent filings with the Securities and Exchange Commission (SEC) reveal that Berkshire Hathaway acquired an additional 377,736 shares of VeriSign in December 2024, investing approximately $74 million over six trading sessions. This latest move brings Berkshire’s total stake in the company to 13.2 million shares, valued at an estimated $2.7 billion, solidifying its position as VeriSign’s largest shareholder.

VeriSign’s Financial Strength: A Buffett Favorite

Buffett’s interest in VeriSign dates back to 2012, and his continued investment underscores his confidence in the company’s robust financial health and high-profit margins. VeriSign is a standout in the S&P 500 (SPX) rankings:

• Profit Margin: 55.74%, tied with Nvidia (NVDA) for fifth place.
• Operating Margin: 51.24%, ranking third.
• Gross Margin: 87.61%, securing the thirteenth spot.

These metrics highlight VeriSign’s operational efficiency and profitability, making it a rare gem in the tech sector.

Stock Performance: Undervalued or Overlooked?

Despite its impressive fundamentals, VeriSign’s stock hasn’t mirrored the broader market’s performance. While the S&P 500 rallied 25% in 2024, VeriSign’s stock remains down by 1% year-to-date and a significant 20.28% off its peak of $255.93 from December 2021.

The stock briefly surged nearly 2% following Berkshire Hathaway’s announcement, reaching its highest level since January, before settling at $203.95 — a modest 0.60% gain amid a broader market sell-off.

This underperformance could signal to Buffett and his team that VeriSign is undervalued, presenting a unique opportunity for long-term investors.

Why VeriSign? Buffett’s Long-Term Strategy

VeriSign’s business model is built on providing essential digital infrastructure for internet domains, a service that ensures consistent demand. The company operates the .com and .net domain registries, making it an integral part of the digital economy.

Buffett’s decision to increase Berkshire’s stake in VeriSign aligns with his well-known strategy of investing in companies with strong fundamentals and long-term growth potential rather than chasing short-term market trends.

“Buffett’s investments often reflect a deep understanding of a company’s intrinsic value,” says market analyst Ari Haruni. “VeriSign’s high margins and critical role in internet infrastruc

A Signal to the Market

Berkshire Hathaway’s investment in VeriSign sends a clear message to the market: high-margin, essential service companies remain a cornerstone of long-term value investing.

While some investors may overlook VeriSign due to its recent stock performance, Buffett’s endorsement highlights the company’s resilience, profitability, and potential for growth in an increasingly digital world.

As the internet continues to expand and domain services become even more critical, VeriSign is well-positioned to maintain its leadership role. For investors looking for stability and profitability in the tech sector, Buffett’s latest move is a compelling vote of confidence.