I'm a big fan of reading everything and anything I can find surrounding my investments. This is especially so of Sirius XM (SIRI) as it is my largest position. I'm interested in contrarian perspectives to my own, often more than I am interested in views which support my positions. It's part of the due diligence you will hear spoken of so frequently by traders and investors alike. Whether long or short, it is important that one is an information sponge.
What is even more important than being that sponge, though, is being a filter. Squeeze the sponge once in awhile, and let all that dirty water you've absorbed flow back out. The important thing is not where the dirty water came from. Whether from the bull or the bear camp, it's dirty water and it's best to get rid of it.
There has been an awful lot of noise lately surrounding Sirius XM, and the vast majority of this stems from speculation surrounding what Liberty (LMCA) might or might not do when their restrictions are removed (or at this point, were removed). I am absolutely as guilty as the next person in speculating as you can see by attempting to guess what may or may not happen. I have been part of the noise, even if I feel I have maintained good perspective. Do you filter me out? Do you filter out this, or this, or this? Squeeze the sponge. I'd say dirty water comes out from everywhere.
As investors it is fun to trade a portion on speculation, and maybe let a bit of money ride on news, expectations, and a little bit of guesswork. I'm a strong believer that the core of one's holdings, though, should have a solid foundation to give the confidence that one's investments will not falter with the winds as they blow this way and that. Because of this, how we view our core should not be affected by our speculative interests, and the guesswork of ourselves and others.
The fact of the matter is this. With Sirius XM, regardless of what does or does not happen with Liberty, we are setting up for an absolutely knock out year. Keep the following points, and others of your own firmly in your brain, and you should do very well moving forward.
- Auto sales at recent record highs and projected to continue this trend.
- Nominal price increase this year which should bolster income considerably.
- Additional penetration into the used auto market.
- Conservative guidance which virtually ensures a "no miss" situation.
- Gradual transition to the Satellite Radio 2.0 platform.
- Limited additional competition in 2012 beyond terrestrial radio which has been there since day 1.
It is exciting to entertain the prospects of a buyout. It's great to think of falling asleep one night and waking up the next morning, finding your shares suddenly 50% in the green. Don't make the mistake, though, of falling for the hype of the trade, or the dreams of the big score when it comes to the core of your investment. Remember why you invested in the first place. Nothing has changed about that. Squeeze the sponge. Get the dirty water out, and move forward with a clear mind and your sights set on the future you saw when you invested in the company.
You'll sleep much better tonight because of it.
Additional disclosure: I may initiate a long position in SIRI June $2 2012 calls at any time.