It's probably just human nature, but we, as a collective called society, like to have it both ways.
Often, any hint that a bullish shareholder should sell Sirius XM (NASDAQ:SIRI) gets met with defiant yelps of I'm an investor, not a trader! And, despite all of the debates I've had with the SIRI peanut gallery over the last year, there's something to that sentiment. While I do not consider traders evil beings who would torture dying insects for a quick buck, they do own a different mentality than investors. An investor buys a company, not merely a stock. Of course, investors should never get emotionally attached to a company or stock, but they should (hopefully) have enough faith in the conviction that got them into the position in the first place to not only ride out weakness, but buy more shares on it. That approach has worked wonders for many SIRI investors, particularly those who got in when satellite radio was left for dead.
That's why I was shocked (not really) by the response many ardent SIRI bulls had to Pandora's (NYSE:P) post-earnings plunge and my attendant long position. Of course, the handful of children who make up the SIRI gaggle ridiculed me. That's to be expected. But, more than a few sane and logical individuals questioned why I simply do not trade the stock:
Plans? No, no plans, other than the bottle of Jack Daniels I promptly washed down with Pepsi after listening to Pandora's earnings call. But seriously, I am not sure why I would have "plans."
I initiated an investment in Pandora last year. I have purchased the stock several times a month since then at prices anywhere from under $10.00 to nearly $16.00. I am in at an average of $13.23.
I got into the stock because, after a considerable amount of research, which included talking directly to the company, I came to believe in Pandora's long-term potential. In a forthcoming Seeking Alpha article, I will expand on that more than I already have in previous writings. I measure long-term in years, not days, weeks or months. And, if you listened to Pandora's earnings call, you know that the company continues to sell the long term, defining that timeframe, at least in one respect, as 18-24 months.
Plenty of shareholders, not just SIRI bulls, like to draw the distinction between traders and investors. That's why I am not sure why so many people would encourage me to trade in and out of a position I entered as a long-term investment.
As a relatively small, long-term investor, I have no choice but to scale into a whole host of positions over time. I guess I could just put the money I put into Pandora every month into other stocks, funds or a savings account. I could just stockpile the cash elsewhere and throw it all at Pandora at one time when I feel the company is on the cusp of breaking out. For want of a better word, that's a fool's game. And it's certainly not a long-term investor's game.
On occasion, I have traded Sprint (NYSE:S). The reason is quite simple. I have about zero faith in Sprint's near- or long-term prospects, but I have plenty of confidence that the stock will gyrate in a range throughout $2.00-land. It's a classic trader's stock, sort of like SIRI.
That said, you could make a credible case for S or SIRI as long-term investments, rather than swing trades. And, if you have enough faith in that case, you should probably buy the stock, on a regular schedule, as long as nothing material changes to break up the long-term story. That's what an investment is. You don't stop yourself out of it. You don't set some unrealistic profit target. You scale into a position until the company gives you a reason to reverse course, not just some headwind or expected signpost on the long road to stable growth and profitability.
That's an awful way for a trader to view a position, but, where I come from, it's only the way for a long-term investor to not only get in the game, but stay in it long enough to reap the rewards that go along with being a long-term investor.
Disclosure: I am long P.