Sirius XM's Short Interest Continues to Drop

By Brandon Matthews

The recent short interest report would indicate that the Street is beginning to see the light with regards to shares of Sirius XM Radio (SIRI). Facts such as these must have Sirius XM’s harshest critics scratching their heads. I have no doubt that these critics are wondering how to now reverse their negative positions and still maintain their appearance of credibility. Sure there are some who just don’t care what people think because they think so highly of themselves. Jim Cramer, as an example, just last week used Fannie Mae (FNM) and Freddie Mac (FRE) as a means to yet again condemn Sirius XM Radio. After calling all of these equities speculative used lottery tickets, he reversed his position just two days later on Fannie and Freddie, with absolutely no reason offered for his reversal after telling retail investors to sell at the low and then buy on a high two days later.

I, too, have my share of critics who question my bullish position on Sirius XM Radio. The difference is that I have been right. Sirius XM Radio shares have been up as much as 1500% this year off of its lows as the more famous financial experts and sources have failed miserably. A lot of these sources are now faced with a quandary. Sirius XM gets a lot of clicks for a lot of sites. Many such as the Motley Fool will often include Sirius XM Radio stock in a discussion about (as an example) Fresh Del Monte Fruit (FDP). It’s good for web traffic. They certainly cannot stop writing about Sirius XM for that reason, but now they and others like TheStreet.com are facing the possibility of having to pull a “Jim Cramer” and reverse their position on the Satellite Radio provider after being wrong for so long. So much for credibility.

The above represents opinion. The following represents fact. Sirius XM short interest is continuing to dwindle down to levels never seen before, a sure signal that sentiment has reversed to positive on the Street. The latest report indicates that there were only 119,653,289 shares short out of a float of 3.89 billion shares. A fourth straight consecutive reported drop.

Perhaps this is due to recent changes that were brought about by recent actions of the SEC to put an end to naked short selling, which followed the movie Stock Shock (shameless plug) bringing the issue to the forefront of investor attention and the actions of Senator Kaufman.

Perhaps it has something to do with Apple’s (AAPL) iPhone launch in China, which Sirius XM is poised to capitalize on with their recently introduced iPhone and iPod Touch app. Perhaps it's the pending turnaround in the economy, cash for clunkers or its new hardware introductions. Clearly Sirius XM is here to stay, and no amount of negative media bias will change that.

Position: Long SIRI.

Comments

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Analyzing the trading levels of SIRI from the time recovery began last March, it is clear that holders of the short positions listed above lost an estimated $74 million as the share price steadily rose from the mid .30's to current levels near .70. With short interest still estimated to be around 100 million shares, further exposure exists to holders of these positions as the fundamentals have substantially improved for Sirius XM in recent months. Expectations should remain favorable going into the 3rd Qtr. and 4th Qtr. releases of earnings and guidance (due in November and February), reflecting the positive impact from resurgent auto production and demand - along with developing markets in the wireless arena. These influences should continue to drive short covering over the near to intermediate term and the stock should remain technically strong into the future.

Aug 31 08:34 AM