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By Thomas H. Kee Jr., Stock Traders Daily

On Tuesday two important rating changes were made by Goldman Sachs. Goldman initiated coverage on Sirius XM Radio Inc. (NASDAQ:SIRI) with a buy rating, and downgraded Owens & Minor (NYSE:OMI) to sell. We rarely see sell ratings and even more rarely, we almost never see buy ratings on stocks under $5 (the street considers cheap stocks to be penny stocks), so each of these deserves investigation. We have rationalized each of these decisions separately.

Sirius XM Radio Inc.:

SIRI serves an affluent market; it offers a luxury service that many users think they cannot live without. In an economy that is struggling these high end luxury items are often the first ones to go. However, when economies are strong consumers are willing to pay a little more for added value services like the added value services Sirius XM Radio Inc. offers. Therefore, Goldman's decision to initiate SIRI with a buy reflects both a belief in at least the high end consumer; that means even if the economy falters Goldman believes the higher end consumer will remain strong, but it also reflects confidence in SIRI's recent decision to repurchase $2 billion worth of stock.

The cat was out of the bag early Monday because the major increase happened before this news became public, but according to our analysis the stock seems to have limited upside. According to our real-time trading report SIRI faces major resistance just above $3 per share. This number is dynamic and will adjust as the price of the stock adjusts.

Owens and Minor:

This call looks like a valuation call because OMI still expects growth next year; they just don't expect growth to be as strong as they did before. Instead of looking for growth above 4% Owens and Minor is expecting growth between 2 and 4% next year. The company trades with a price earnings multiple over 16, so based on the middle ground growth expectation of 3% the stock trades at more than five times expected growth rates, and that makes it extremely rich by any stretch of the imagination.

According to our real-time trading report for Owens and Minor the stock is already in the process of declining towards longer-term support, additional declines look likely, and if longer-term support breaks lower significant declines can follow. Typically investors are willing to pay 2.5 years worth of future growth today. That influences the price earnings multiple, but if OMI is only expected to grow at 3% fair evaluation it might actually be well under $20.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: This article was written by THomas H. Kee Jr., President and CEO of Stock Traders Daily, and neither he nor Stock Traders Daily receive compensation from the companies mentioned in this article for writing thi article.