Every quarter, massive hedge fund SAC Capital files a lengthy document with the SEC outlining its holdings for the previous quarter. A comparison of the fund's stake in Sirius/XM (SIRI) at the end of 2010 to the end of this year's first quarter reveals a substantial increase in shares held.
As of December 31, 2010, SAC Capital held 280,901 shares of SIRI.
As of March 31, 2011, SAC Capital reports a stockpile of 7,668,172 SIRI shares.
By the looks of Monday's action in shares of Sirius/XM, investors did not get wind of, or care much about, SAC Capital's recent bullishness. Instead, they likely reacted to news that Sirius/XM settled a lawsuit by, in part, agreeing not to raise its subscription rates through the end of 2011. A copy of the meat of the settlement and Monday's SIRI chart follows.
(Chart courtesy of FreeStockCharts.com)
I find it incredibly comical that investors ran up Sirius/XM's stock price largely on the basis of CEO Mel Karmazin's excellent conference call performance, yet ran it back down a bit on news that they'll have to wait just a few short months before the company charges more for its services. Do they think the Amazin' Karmazin did not know about this development when he spoke of a price hike that will equal more than an inflation adjustment? I wish I could pull a Jon Stewart right now, turn to the camera, roll my eyes at you, and sarcastically state, "Sometimes investors aren't very smart."
Regardless of news or noise, SIRI was ripe for a pullback. The move down should come as no shock. See that 50-day moving average of $1.87. I don't think SIRI touches it ever again. The only way it even has a chance is if it breaches the more-important psychological marker of $2.00. And the longer the stock stays where it is now, the higher up that dark blue line will move. At some point above $2.00, a candlestick and the blue line will slam dance for a few days. From there, I think the stock makes its next move up.
It used to be that SIRI bulls salivated for any chance to buy shares under $2.00. Those days are gone. Right now, the $2.10 ($2.05-ish, if you're lucky) to $2.15 level represents a bargain. Get 'em this week while they're hot.
Karmazin did what he needed to do on Sirius/XM's Q1 call. He'll do what he needs to do on the next one, which might include finally telling the world all about SatRad 2.0. After that I expect SIRI to take out the psychological barrier of $3.00. That said, a strategy that uses SIRI January 2013 call options to take part in the upside remains intact.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SIRI over the next 72 hours.