"If all printers were determined not to print anything till they were sure it would offend nobody, there would be very little printed." -Ben Franklin
As all eyes and ears will focus on Ben Bernanke this week, might I suggest we look to the words of a real genius and a quintessential American, Ben Franklin 1706-1790 (US author, diplomat, inventor, physicist, politician, printer and thinker). Though we may live in very different times and are separated by a couple hundred years or so, I encourage you to ask yourself if any of these quotes have lost any value in the age of high frequency trades and electronically traded funds. I will seek to apply his germane wisdom to the company Sirius XM, the stock (NASDAQ:SIRI) and more generally to SIRI investors.
"An investment in knowledge always pays the best interest." -Ben Franklin
Sirius XM has had thousands of pages of historical, anecdotal and regulatory information written about it and available online to educate you. Its launch as a business over a decade ago was rightly seen as a threat to the mainstream terrestrial radio broadcasters and to the oversight and regulatory authority of the FCC. Many roadblocks designed to delay, derail, disassemble and destroy had to be negotiated, reconciled or circumvented in order to gain traction on the road to its current viability. Many requirements were imposed and many concessions were made along the way and it remains logical to expect that many more will come. Many daily opinions are written about it, and for good reason, it has broken the backs and wallets of many early investors, and has rewarded the intrepid among us with millions. It draws the attention of millions of eyeballs, engages millions of ears and creates hundreds of millions of trades on a weekly basis. Spend your time doing what will benefit you the most. Learn to read and understand all reports, filings, blogs, reviews and news, this will help you to develop an "informed" opinion. Benjamin Franklin said: "Diligence is the mother of good luck." A general knowledge of the many styles of investing as well as the ability to recognize technical indicators and understanding the company's fundamentals may shed light on what others are thinking (and doing) that may affect the direction of this stock. To this end, Benjamin Franklin also said: "A learned blockhead is a greater blockhead than an ignorant one."
"All mankind is divided into three classes: those that are immovable, those that are movable, and those that move."-Ben Franklin
As we all can be described as one of these classes, it often leads to the heated opinions and criticisms about the actions or inactions of others. I often switch between elation and frustration as I read many of the comments that accompany these articles. However, I am always confident that I will find (with consistency) a lack of comprehension related to the educational benefits of being exposed to clashing ideologies or the more detrimental, (yet still educational) common uselessness of blanket dismissals of any opinion other than our own as ineffectual or foolhardy. Ben Franklin said: "Distrust and caution are the parents of security." and this: "We are all born ignorant, but one must work hard to remain stupid." There is always the entertaining and emotional bewilderment (or anger) about the opposing action or inaction of others. Ben Franklin said: "Any fool can criticize, condemn and complain and most fools do." This of course is simply human nature and more about our desire to be right and to influence rather than be influenced. The Immovable class should be above influence yet are often the most vocal about the repeated attempts to be influenced. The movable class is certainly the wishy-washy among us, they are highly influenced and willing to move, yet they lack the ability to execute due to the paralysis of analysis. Benjamin Franklin said: "He that waits upon fortune, is never sure of a dinner." Those that move are mostly in my class as I trade more than I actually invest. I suppose Benjamin Franklin might tell me this: "Never confuse motion with action." or more likely this: "There are three faithful friends - an old wife, an old dog, and ready money."
"Necessity never made a good bargain."-Ben Franklin
I often wonder if investors in Sirius XM know that satellite radio was initially one single company that was split into two competing services over monopolistic concerns. Ben Franklin said: "The first mistake in public business is the going into it." They were forced to grovel for reunification in front of the very regulatory bodies that mandated the split in the first place. After being granted a delayed approval to merge out of necessity, satellite radio was left reeling after the years of fierce head to head combat, over-paying for content and the massive redundant infrastructure expenditures combined with a historically severe recession had all but guaranteed bankruptcy for one of the two companies. Necessity introduced the double edged swords of the likes of Howard Stern and John Malone, whose involvement can be seen at once as crucial, beneficial, opportunistic and detrimental. Depending on your perspective this next quote can apply to either of these "gentleman" or Sirius XM. Ben Franklin said: "Most people return small favors, acknowledge medium ones and repay greater ones - with ingratitude."
"There are two ways of being happy: We must either diminish our wants or augment our means - either may do - the result is the same and it is for each man to decide for himself and to do that which happens to be easier."-Ben Franklin
As (SIRI) has recently reversed course into a downtrend, many longs are fearful, many competitors are joyful, many sideline spectators are salivating at the opportunity of a discounted entry and many more supposedly "disinterested" bears are feeling vindicated after years of contemptuous bashing. I can only say that the uncertainty of this sluggish economy, the vigorous competition and the lingering law suits have given pause to the elation of ascension over the last 2 years. Although thoughtful consideration of these headwinds is the smart thing to do, one must explore their own risk tolerance, and balance these concerns with the knowledge that Sirius XM has seen far worse times, overcome much larger obstacles and has maintained an increasingly popular service against all odds.
Ben Franklin said: "To Follow by faith alone is to follow blindly." My faith aside, I remain focused on the numbers. The overwhelming majority of Sirius XM's subscribers come from auto sales and it is therefore reliant on auto sales remaining where they currently stand, but may also reap the rewards of an auto sales recovery or conversely suffer lower growth if auto sales decline. In the most recent quarterly report auto sales growth and a higher OEM penetration rate helped Sirius XM achieve a year over year subscriber increase to a new record of 21,016,175 an 8% increase from the 19,527,448 subscribers reported in the prior years quarter.
In addition, self-pay net additions in the second quarter of 2011 were 362,663, up 19% from 304,043 in the second quarter of 2010. A relatively flat self-pay monthly churn was 1.9% in the second quarter, My decision to remain long is borne out of an understanding of the history of radio and its enduring popularity, the past performance of the company and faith that a service as great as Sirius XM will not simply go away so easily and Ben Franklin agrees: "To succeed, jump as quickly at opportunities as you do at conclusions."
I see the current price decline as an opportunity to add to my position, the possibility of a further decline into the $1.50-$1.60 range is well within my pain threshold. Never being "all-in" provides me with a wide range of opportunities to pick-up shares others have abandoned out of fear, and a willingness to sell into the upward reversals come quite regularly.
"He that can have patience can have what he will."-Ben Franklin
Disclosure: I am long SIRI.