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Often investors will look at a stock and scratch their heads wondering why the share price is not meeting their expectations. When we see a company that is performing well and doesn't really have any red flags passing through the wire, yet we see a struggling share price, we tend to look for reasons "why."

Real answers aren't always found from a fundamental standpoint, and I find that people often "fit" answers in to make them feel better. Your stock just went down 2%? Well, it must be the fault of Cyprus, right? Stock went down 5%? Must be because everyone knew it was "clearly overbought," yes?

In a recent article I wrote, this frustration with Sirius XM's (SIRI) stock price can be seen in some user comments. Consider this comment from a user in regards to not seeing share price support yet from Sirius XM's $2 billion buyback plan.

If pressure from the buyback, shorts and also with continued increase in sales, income etc.we should see upward movement in the stock price. This is has not been happening, rather the opposite with shares down at $3.06 on 3/6/13 today was $3.10. Why? At worst one would of thought the price should of held its price at the $3.20 range. Where is the pressure from the shorts that were suppose to cover?

And my response:

Share price is simply a factor of the most someone is willing to pay or the least someone is willing to sell for, at any given time. Supply and demand. Sell being supply, buy being demand.

But supply and demand have some lag to them with the market. This is why you saw Malone being able to purchase stock patiently as it traded sideways, because other factors may have motivated people to sell.

Think of it this way... how many times have you seen Nino scream that the stock is stuck, not moving, dead money, etc. since he sold out of his position? Others may feel that way. There are traders who buy and sell on technicals and may have sold to Malone as the stock was sitting in overbought territory. Maybe some longs were satisfied with their gains up to that point.

It's more a matter of trying to understand the factors which may be moving the price, where the money is going (bid or ask side) and being patient. :)

I used to find myself searching for any reason I could to explain why share prices in a company would go down when it seemed everything was rosy, or up when it really wasn't justified, until I was introduced to money flow data. I've used this in the past in some articles and will say it has served me well, allowing me to see when the stock has been under heavy accumulation despite the share price moving one way or another, and it's one of the reasons I really am not so concerned when the stock moves down from $3.25 to $3.06.

Avafin.com has a very nice trade flow and block trade (>10,000 share trades) tab to show bought / sold ratios and the resulting cash flow, positive or negative. You can clearly see that on March 21st, cash flow was quite positive at $56.6 million on 46.6 million shares traded. Had you watched the trades on level 2 throughout the day on Thursday you may have been able to estimate this yourself with a couple of large 3.9 million share block buys going through at $3.10, among other trades, but Avafin does all that for you.

That being said, checking historical data for Sirius XM since my last report on money flows shows very little in the way of distribution days. Buying has outpaced selling nearly every day for the last 6 weeks and does not seem to be showing signs of letting up. Compare, for instance, Sirius XM's bought / sold ratio chart with the all too familiar Apple (AAPL). Breaches south of a 1.0 ratio are money flows out of the stock.

(click to enlarge)

(click to enlarge)

Sirius XM has had relatively few days of negative flow. Actually Sirius XM has had a single distribution day on March 13th, and only 3 total distribution days this year. Compare this with significant money flow out of Apple and you can see the drastic difference. Also notice the buying pressure for Sirius XM reaches a factor of 3.0 and higher at times. You'll be hard pressed to find many stocks out there that do this.

To me, this points to further accumulation of Sirius XM despite fluctuations in pricing which may not signal to most investors that "buying" is happening. Because of Sirius XM's $2 billion authorized buyback plan, and because I expect this to be guided appropriately to provide the most value for the company, I do not expect the buyback to go through in rapid fashion. Steady buying over the course of months should serve to support the share price, not catapult it into the stratosphere in one fell swoop.

Remember, price is a function of the most a buyer will pay "now" vs. the least a seller will sell for "now." I can buy 40 million shares now, and if there are no other buyers behind me and a seller comes in and sells 1 million shares, the price may drop considerably. That's just the way things go. Over time, though, a slow and steady buyback plan should start to eat up the sellers if done properly, and provide some lift to the share price like the water level in a tub that is filling with a slow drip. Slow, small ripples, not all at once with violent waves.

Patience is the name of the game here to realize full benefit of Sirius XM's buyback plan, and investors would do well to watch money flows, more so than price, to be sure there is not a mass exodus of cash from the stock.

I want to be clear, I write for the longer term investor. I do not write for the day trader nor do I write for the guy flipping shares like a short order cook throwing eggs around at a truck stop. While I may write about support and resistance levels, critical points, etc., my focus is on the overall direction of Sirius XM as a company and the various things going on behind the scenes such as share buyback plans, Liberty Media's (LMCA) moves and intentions, etc. But it's good for both sides to understand one another, too. Understanding the fundamentals such as the buyback plan can save a trader from shorting the low end on a technical break, and understanding the technicals can save a long from selling just as everything seems most dire, right before a rally.

I see Sirius XM's currently hesitant share price as beneficial to my longer term views, and hope that Sirius XM is taking advantage of support level pricing in order to buy back shares on the cheaper end of the scale. Eventually, we'll find out if they have been purchasing once first quarter data is released. Until then, keep an eye on that flow of cash.

Source: Sirius XM: Money Flow Remains High Despite Struggling Share Price

Additional disclosure: I am long SIRI January 2014 $2 calls.