I first visited the Seeking Alpha web site by following a link from Yahoo!Finance to a conference call transcript. As I looked to see what else the site offered, I became engrossed by some of the articles on Sirius XM Radio (SIRI) and quickly became hooked by the quality and passion of the comments by contributors and members. One of those commenters was SiriusSternFan, who subsequently became a contributor - Mick Trivane.
I admired Mick's scathing sense of humor and his vigorous defense of the Sirius XM service, the stock, commercial free music, Howard Stern and performance royalty payments for musicians. I also confess to being jealous of his writing style. Not only was his second article an "editor's pick," but three of his eleven articles garnered that recognition. (It took me 93 articles before one received that distinction, and only five of my 200 articles have been given the designation.)
Over a month ago I had sent Mick a message asking for some detailed information about royalty payments. I hadn't heard back until yesterday and was disappointed with the response:
I've sort of given up on writing about finance. I have begun to write more for entertainment. I am revamping my website with some humorous stories and attached is the link to my first attempt....
I just finished reading that first attempt, a holiday story titled MY CHRISTMAS WISH: "TREAT ME LIKE A DOG!" (It's not exactly a Charlie Brown type of Christmas story, but certainly worth the read.) Mick wrote:
For millennia people have described the inequitable and harmful treatment of their fellow human beings as being treated "like a dog" and to this day, in many parts of the world there is no greater insult than to use the word "dog" while endeavoring to really hurt someone's feelings.
I couldn't help thinking about some of the connections to Sirius XM, the company and the stock. Sirius is one of the brightest stars in the night sky and is also known as the Dog Star because of its inclusion in the constellation Canis Major. The Sirius logo used to include an image of a dog with a star for an eye...
(click to enlarge)
And it's not just the image of the dog. When a company underperforms or when its stock does poorly, we often refer to it as "a dog." In fact, there is an entire investment philosophy termed the "Dogs of the Dow."
The Dogs of the Dow are the 10 of the 30 companies in the Dow Jones Industrial Average with the highest dividend yield. In the Dogs of the Dow strategy, the investor shuffles around his or her portfolio, adjusting it so that it is always equally allocated in each of these 10 stocks. ...
From 1957 to 2003, the Dogs outperformed the Dow by about 3%, averaging a return rate of 14.3% annually whereas the Dows averaged 11%. The performance between 1973 and 1996 was even more impressive, as the Dogs returned 20.3% annually, whereas the Dows averaged 15.8%.
Sirius XM stock may as well have been termed a dog by some of its detractors. One Seeking Alpha contributor wrote a number of articles earlier this year including Sirius XM: Are We Watching The End?, where he wrote:
In my humble opinion, shareholders are toast. If the entity called Sirius XM does not go bankrupt, the share price has certainly been capped, basically for good.
and Sirius XM: Can This Stock Be Any Less Desirable? where he wrote:
Let me be blunt. Sirius XM stock is dead money right now. I believe it is perhaps the worst purchase an investor can make.
He was not alone in his view. Others were telling investors to short the stock or invest in the company's competition, Pandora (P). So, is Sirius XM a dog? Before answering the question, let me quote another part of Mick's article:
You have heard it said a million times "You are a dog!" Although the origin of this expression is deeply seated as a pejorative, I believe in recent years it has become a positive label to which each person should strive to attain. Let me explain....
...over the past 10 years or so there has been an astounding shift in the paradigm... as a dog? You are exalted, cherished and coddled, and life as a dog with a loving owner could not be more of a delight.
Even more interesting is the way the terms "You dog!" or "You're such a dog!" have actually become terms of respect.
Is Sirius XM worthy of respect? In 2012 the company has paid off nearly $1 billion of debt with interest rates of 9.75% and 13% and was able to borrow $400 million at 5.25% for a 10 year period. It will pay a $325 million special dividend and announced a $2 billion share buyback. Liberty Media (LMCA) decided it was worth pouring $1.5 billion dollars into Sirius XM stock to increase its ownership stake to just under 50%. The stock has risen from $1.82 to $2.99 since the beginning of the year, a rise of 64%.
It has been a performance worthy of a great deal of respect. It has also been a performance that I think will be impossible to duplicate in 2013. I remain bullish on the intermediate term prospects for the share price, although much less so than other Seeking Alpha Contributors that think $4 is achievable in 2013. I believe a price more in line with the recent Goldman Sachs target of $3.50 is much more reasonable.
So, once again, is Sirius XM a dog? Well, certainly not in the pejorative sense, but...
Sirius XM, you're such a dog!
Disclosure: I am long SIRI.
Additional disclosure: I have $3 January 2013 covered calls against most of my SIRI position. I also have a variety of other covered call positions, including $3 December covered calls opened this week. I may initiate (or close) a buy stock/sell option position in SIRI discussed in a recent article at any time. Also, in addition to long-term holdings, I have recently begun day trading 10,000 share blocks of SIRI and may continue to do so. I have no position in other stocks mentioned in this article.