May Auto Sales Good Enough For Sirius XM

May.20.13 | About: Sirius XM (SIRI)

It is the middle of the month, and once again it is time to look at auto sales as they relate to satellite radio provider Sirius XM (NASDAQ:SIRI). I provide these updates at the middle and end of each month so that investors can track the progress, and perhaps even develop a trading strategy around the news flow. If an investor can anticipate the news prior to the press reporting it, and can find the right action point going into the mainstream media reporting news, a profitable trade can be had.

For Sirius XM, the equity is running at 52 week high territory. This means good news can make a run continue, while bad news can let some air out of the tires.

For the first half of May, the auto sector is remaining at a SAAR pace of about 14.8 million. The second half of April saw sales taper off, and there has yet to be a recovery to a SAAR above 15 million in May.

Auto sales look to be at about 1.4 million for May. This is modestly better that the 1.33 million we saw last May, but the growth rate appears to be flattening out. There are several dynamics at play. Inventory has been creeping up, which means discounts could come into the equation and spur sales. However, production may also slow a bit, meaning that satellite radio subscribers counted at the time of production may slow a bit. All of these are very modest moves and should not be of paramount concern at this point.

The trick here is trying to gauge the headlines coming out as May ends. As of right now, they will likely be modestly positive, with hints of a small lull in the equation. Absent other news, the car sector will not be enough to drive Sirius XM's stock to higher levels. In contrast, the news should not be so negative that it causes a dip.

Essentially, the play here for active traders as it relates to the auto sector is to buy when the equity dips below the 10 day average, and trade off at any spike.

Overall, the auto sector is still on a pace to be higher than 15 million for 2013. Some analysts are even expecting to see 15.5 million. That is still growth over 2012, but is not the double digit growth we have been seeing in previous years. Stay Tuned.

Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.