I couldn't help but notice an article published today by fellow author Cameron Kaine making suggestion that "smart money" is leaving Sirius XM (SIRI). The premise of Cameron's article is that investors should be asking questions as to why the so called "smart money" is selling partial or full positions in Sirius XM.
The evidence of this selling activity is as follows from the Nasdaq institutional activity listing on Sirius XM :
As can be seen here, there was a net sale of just over 4 million shares of Sirius XM between 12/31/2011 and 3/31/2012 at a current street value of roughly $9 million. Mr. Kaine then poses the question that investors should be asking themselves and the 5 firms above, why they sold these shares.
But I don't agree with that line of thinking. Here's why.
$9 million on a stock with a current market cap of over $14 billion including Liberty's (LMCA) stake is a drop in the bucket. To give perspective, one can look at the ratio of $14 billion to $9 million. That's like looking at the ratio of $14,000 / $9. How much of the market cap is that $9 million? 0.06% Six hundredths of one percent. On a given trading day for Sirius XM, 4 million shares would amount to about 10% of one day's worth of average volume. This is a horribly small number to base opinion off of, and I think any investor leading themselves down this path is doing themselves a disservice. Were this number much higher, I believe it would deserve some consideration. This number, though, is pitifully small.
If one wishes to ask questions, I think the important number to look at when considering what is termed "smart money" is the current institutional holdings as of 3/31/2012 in the latest report.
- 432 Institutional Holders
- 1,592,494,341 Total Shares Held
- $3,583,112,267 Value Of Shares Held By Institutions
That's the important question to ask. Why do these 432 institutions see value enough in Sirius XM to hold a collective $3.58 billion position in the company? One could even add Liberty's stake of 40% to the total here, as they are holding their position as well.
When I ask myself this question, the answer is quite clear to me. You see, if I see trouble, or do not believe in my investment, I sell it. I don't sell a small amount, and I certainly don't keep 100% of my position as the vast majority of institutions have done, according to the Nasdaq data. Because these institutions have held their shares strong and fast, I come to the assumption that they believe these shares have potential to appreciate. And I come to the assumption that they believe these shares have the potential to appreciate beyond the current share price in the future.
I'll put my money along with the $3.58 billion "bet" and choose to assume that the very small sale of partial positions by some of those holders was due to various reasons but unlikely related to Sirius XM. Consider that these sellers retained positions in Sirius XM despite selling part of those positions. If they had so much concern about the stock as Mr. Kaine implies, then why would they keep such large positions in it, such as HHR's 29 million held shares?
As investors we should always ask ourselves questions. But in doing so, always make sure to ask yourself the right questions surrounding your positions in order to provide yourself with the most pertinent information.
Additional disclosure: I am long SIRI April May and June $2 calls.