I've been a long time Sirius XM (SIRI) investor - going on over eight years. However, the term "investor" is one that I have begun to use more carefully these days because I have been accused of using it too loosely. To some, It seems that I have never really fit that description because I have exited out of my positions too frequently. This leads me to question, are we really all investors after all and what truly fits the description? Is there pride in being an investor as opposed to a trader - the latter (I'm told) fits more the criteria of what I truly am. But so it goes.
In learning this morning that several large institutions - the so called "smart money" - have shed their holdings of Sirius XM, I ask the question, are they also traders and not investors? That is one thing that I have also heard quite a bit among the many myths associated with Sirius, "smart money is buying." Should we now concede that smart money has sold - at least some?
In a recent article by fellow Seeking Alpha contributor Rocco Pendola, he raised this point long before we found out this morning regarding the sales last month in an article titled Big Money Interest In Sirius XM. Rocco noted the following:
- To my knowledge, the big money is actively researching what amounts to the next leg up for Sirius XM. The burning question: Can the company do what needs to be done to take the next leg up? While SIRI bulls focus on present success - impressive subscriber numbers and free cash flow, for example - analysts at major investment firms want to know about the company's competitive position and its ability to leverage multi-platform opportunities outside of the dash. In other words, is SIRI a formidable long-term investment, poised to step up revenue and EPS growth in a meaningful way?
- I know SIRI bulls think I just lean back in my underwear in my Santa Monica apartment stirring a steaming pot of cat stew dreaming up ways I can "bash" Sirius XM. Not true. I talk to people who work in and know the industry Sirius XM navigates. Almost to a person, these folks - some of whom are big money themselves or work with the big money - share my long-term concerns.
- The bottom line to all of this? While Sirius XM attracts a considerable amount of "big money" investment it could garner more. But major investors are not solely focused on today's subscriber number beat or impressive free cash flow. They all know that Mel Karmazin knows how to run a business. In fact, he's among the best. The question that remains, however, is whether or not he has a way to take his company to the next level.
For all of the criticism that Rocco takes for what I consider appropriate and reasonable expectations for Sirius, I think he deserves quite a bit of credit for having drawn attention to the likelihood that the so called "smart money" may also one day expect more. This does not at all imply that the company is any less viable today than it was yesterday, last month or even last year. The question we need to have answered is - what they have noticed that we are ignoring? If the so called "smart money" is now selling the stock, what are they anticipating down the road and should we anticipate the same?
In addition to investment managers such as Steven Cohen of SAC Capital, Paul Tudor Jones and George Soros all reduced their positions in the satellite radio company in the fourth quarter. Here is a list of names that recently made adjustment to their positions courtesy of the Street.com:
- Steven Cohen, SAC Capital Advisors - The hedge fund, run by Steven Cohen, slashed its stake by nearly 75%, selling 19.9 million shares. That left him with a stake of just over 3.5 million shares as of the end of December.
- Asian Century Quest Capital - Asian Century Quest Capital isn't one of the more well-known hedge funds, but this Asian-oriented investment manager more than tripled its stake in Sirius, acquiring 14 million shares. That increased its stake to 20 million shares. Asian Century is a New York-based hedge fund that primarily focuses on Asian equities, so adding a huge position in Sirius is noteworthy for the company.
- George Soros, Soros Family Fund - George Soros' family fund had a tiny position in Sirius, but did sell all 34,300 shares it had in its portfolio. Soros has retired from running other people's money, and now manages family investments only.
- John Thaler, JAT Capital - John Thaler's hedge fund has been known to love high-flying growth stocks, so the reduction of his stake by 30.5 million shares is something of interest to note.
- John Griffin, Blue Ridge Capital - Blue Ridge Capital, which seeks absolute returns by using a long/short strategy, initiated a massive position in the stock, purchasing 55.4 million shares.
The reality is, I think Sirius can correct what ails its business and how it is perceived. To combat this perception, I recently I suggested that the company should endeavor to rebrand itself by dropping the words satellite and radio from its name. Instead I thought a more suitable name should be Sirius XM Audio Entertainment - one that offered not only more of an appealing quality but also sounds less restrictive to the services that are often associated with just satellite and radio. I think this is an idea that now deserves more consideration especially with Lynx having now been officially launched.
It seems as much as Sirius is moving forward it continues to struggle with leaving old technology behind. While it continues to be a great turnaround story, I think this tight definition will hinder the tech image that it eventually might want to adopt. This is the same mindset that has allowed Amazon (AMZN) to now be considered a technology bellwether when it first started as a retailer - one that sold only books. Now not only is the company a formidable opponent to Apple (AAPL) by the early success of its Kindle Fire, it has also taken on Netflix (NFLX) in movie streaming with its Amazon Prime service.
As down as I am so far on Sirius, I am not ready to say that the company will not be successful. It indeed has some challenges and it needs to address some of its key concerns - a lot of which has to do with (as I've stated many times) its poor image. The 1.3 million net subscriber guidance that it gave was an example of an underdog mentality. The company's major problem is that it still operates as a "long shot" when it can do things to remind investors that it can (indeed) win.