Revealed: Warren Buffett Just Bought More of This Cheap Internet Stock—Should You Follow?

Whenever the great Warren Buffett makes a move, some of his many followers are sure to scramble to follow in his footsteps. Indeed, Buffett and Berkshire Hathaway (NYSE:BRK-B) have been major net sellers of stock of late. So, it can feel like a breath of fresh air of sorts to learn of some buying activity from the legendary firm, even if it’s just a modest top-up to an existing position.

Though the news broke days ago that Buffett’s Berkshire had added to its position in lesser-known domain name registrar Verisign (NASDAQ:VRSN), not to be confused with telecom and previous Berkshire holding Verizon (NYSE:VZ | VZ Price Prediction), I do think the move is rather notable. Whether the big purchase suggests there’s deep value to be had in that “boring” corner of the internet scene remains to be seen. Either way, I think it’s hard to argue against the potential undervaluation to be had in that dull but still very necessary (and profitable) corner of the tech scene.

In many ways, Verisign is a behind-the-curtains type of internet play, and one that seems highly underrated by the market and other investors out there, many of whom would rather load up on the artificial intelligence (AI) chip plays that have been leading the stock market higher for well over a year now. After the latest Berkshire buys, the insurance giant now holds more than 13 million shares. It’s the largest shareholder, and it’s not yet clear as to whether the latest bet will be the last.

Either way, shares of VRSN are up close to 10% in the past month. And they could be headed higher in 2025 as the underappreciated dot-com-era laggard looks to break out of its multi-year consolidation to new all-time highs. Despite the latest rally, shares are still down close to 20% from all-time highs hit back in late 2021.

Verisign’s moat is incredibly wide. No wonder Warren Buffett’s Berkshire has been loading up

With U.S. senator Elizabeth Warren recently shining a bright light on Verisign over its “monopoly” in the domain registry scene, questions linger as to whether the government will chip away at the firm’s rather wide economic moat.

Indeed, Buffett is a big fan of wide moats. And with Verisign attracting attention in Washington, there are uncertainties that remain. Though it’s way too early to tell whether Elizabeth Warren’s calls for scrutiny will be answered anytime soon, I do think investors shouldn’t shy away from the name if they’re looking for next-level value and a rather easy-to-understand business model.

Undoubtedly, the company has impressive pricing power. At the end of the day, a “.com” domain is very much prime real estate in the modern era. In many instances, firms won’t think twice about paying up a bit more to renew their domain leases. Undoubtedly, the bigger risk would be cheaping out and letting a domain go back on the market.

At 23.9 times trailing price-to-earnings (P/E), VRSN stock looks pretty cheap, especially for a proven wide-moat firm with a rather predictable stream of profits. Recently, Baird analyst Rob Oliver upgraded the stock to outperform from neutral (along with a price target hike of $50 to $250 per share) following the renewal of its contract with the National Telecom and Information Administration (NTIA). He’s also a fan of potential growth for top-level domains moving forward.

The bottom line

With the confidence of Buffett’s Berkshire and Baird’s Oliver, I’d not be afraid to pursue the name going into the new year.

While a breakout may still be many months or quarters away, I’m a fan of the moat width and the valuation to be had at just north of $200 per share. It’s a steady and relatively cheap business in a stock market that some may view as getting a bit frothy. Sure, I’m no fan of paying a fatter “Buffett premium” for a stock, but if the new year starts with a correction, perhaps VRSN shares are worth watching a bit more closely.