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Sirius XM is one of the most controversial stocks in the market. During the peak of the financial-crises, the stock was treated as a penny stock, which was dumped by investors. Since its dip to $0.1, it has shown remarkable performance. The stock was trading at $1.88 as the time of writing. It closed at $1.86 by the end of the week.

One catalyst for upward movement would be a strong recovery in the economy. Sirius XM’s subscription base is closely attached to the new automobile sales. Auto producers offer promotional subscriptions for a fixed period to their customers. According to Siriusbuz, Ford (F) offers a 6 month promotional subscription, and GM (GM) offers a 3 month subscription to car buyers. Automobile sales are highly cyclical businesses. When consumer confidence rises, automobile purchases usually follow. The financing costs are also important in consumer decisions. Given the low interest rates in the economy, acquiring a new car is much more affordable than before. As long as the recovery in the new auto sales keeps its momentum, Sirius XM’s subscription base will keep growing.

There are rumors that Liberty Media (LCAPA), which holds a 40% stake on Sirius XM, might increase its ownership or completely takeover Sirius XM. While Mel Karmazin might not like this idea, that rumor, itself, is a nice catalyst that can push the stock to higher levels.

Nevertheless, after returning a whopping 1800% since its dip, investing in Sirius XM is not for the faint-hearted. The stock is twice as volatile than the market with a Beta of 1.98. So, one question that arises is when is the best time to buy some Sirius XM shares? It is quite hard to time the market, but there are periods where we observe market anomalies. After downloading the stock data from Yahoo Finance for the last 3 years, I checked for three types of market anomalies from a statistical perspective, using the adjusted close values:

First, I looked at the day of the week to figure out which day is the best day for Sirius XM. Here is what I found:

DAY

Mean Daily Return

Trimmed Mean

Monday

0.02%

-0.09%

Tuesday

0.45%

-0.03%

Wednesday

0.26%

0.51%

Thursday

-0.31%

-0.38%

Friday

0.52%

0.22%

Average

0.19%

0.05%

The trimmed mean excludes 20% of the outliers. The difference between the normal mean and the trimmed mean shows how volatile Sirius XM is. Consider Tuesday. Normally, we expect a daily return of 0.45%. However, if we exclude the 20% of the outliers, the trimmed mean falls to -0.03%. Thus, the outliers dominate the daily returns on Tuesday. Since Sirius and XM merger, Wednesday and Friday have been the best days to stay long Sirius XM. Thursday has been the worst day with significantly negative returns.

Second, I looked for the days of the month to figure out which days are the best to be long in Sirius XM.

Day of the Month

Mean Return

Trimmed Mean

1

-0.75%

-0.60%

2

-0.41%

-0.22%

3

-0.14%

-0.17%

4

0.82%

0.62%

5

1.27%

0.91%

6

-0.43%

-0.09%

7

-1.26%

-1.01%

8

-1.53%

-1.26%

9

-0.57%

-0.20%

10

0.61%

0.81%

11

-1.53%

-0.41%

12

0.97%

0.23%

13

2.92%

1.27%

14

0.44%

0.33%

15

-0.07%

0.27%

16

1.00%

0.65%

17

4.52%

2.07%

18

-0.92%

-0.59%

19

-1.94%

-1.40%

20

0.31%

0.27%

21

-0.95%

-0.55%

22

-0.60%

-0.25%

23

-0.31%

0.13%

24

2.57%

2.09%

25

0.10%

-0.26%

26

-0.39%

-0.24%

27

2.75%

1.24%

28

0.69%

0.48%

29

-0.29%

0.00%

30

-0.34%

-0.31%

31

-0.15%

-0.41%

Interesting observations can be derived from the daily performance of Sirius XM. The stock obviously does not move with the market. We do not observe any kind of turn-of-the-month effect on Sirius XM. The days of 7, 8, 11, and 19 are the worst days fort he Sirius XM bulls. The best days of the month to go long Sirius XM has been 13, 17, 24, and 27. It is quite hard to find any connection between these numbers. Maybe, it is just a random coincidence. It might also be about the CEO Mel Karmazin’s public appearance schedule.

Third, I look for the month of the year to figure out which month is the best to buy Sirius XM:

Month

Mean Return

Trimmed Mean

1

0.65%

0.63%

2

1.93%

1.09%

3

1.04%

0.24%

4

1.10%

0.84%

5

0.04%

-0.11%

6

0.26%

0.03%

7

-0.04%

0.02%

8

0.09%

-0.09%

9

-0.88%

-0.38%

10

-0.03%

-0.18%

11

-0.51%

-0.23%

12

-0.40%

-0.14%

There is an interesting trend in Sirius XM. Since the merger agreement, the stock’s best performing months were the first 4 months of the year. On the contrary, the last four months of the year, including December, have been the worst months to for the Sirius XM bulls. The middle months of the year, May, June, July, and August, experienced neutral returns.

Summary

Sirius XM’s future performance is very much correlated with growth of its subscriber base. New automobile sales are among the primary indicators for the direction of subscriber growth. If we observe a strong recovery that can keep the momentum in auto sales, Sirius XM’s can keep boosting its revenues, as well as, its profitability.

In this article, I looked at a sample of 850 observations that spans Sirius XM’s daily price movements between July 28, 2008 and December 2, 2011. Based on a statistical analysis of historical data, the best months to buy Sirius XM are the first 4 months. When we analyze the data on a daily basis, Wednesday and Friday turn out to be the best days for bulls. The lucky days of the month are 13, 17, 24, and 27. The worst days of the month are 7, 8, 11, and 19.

The data starts from the first day Sirius Radio merged with XM Radio. Interestingly, the adjusted closing price at July 28, 2008 was also $1.88. Since then, the stock went through a U-curve, slipping down to 10 cents, before bouncing back to where it started. For analyzing the daily movements, I used the Excel add-in that comes with the book, Data Analysis with Excel by Berk & Carey, which can be obtained through this link.

Market anomalies are still controversial issues in academics, but I believe they exist and short-term traders can benefit from it by timing the market right. However, it is worth stating that past performance is no guarantee for future results. While Sirius XM’s performance was significantly higher in some specific periods, investors should note that there is no magic formula to perfectly time the market.



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: When Is The Best Time To Buy Sirius XM?