Conviction (noun) : A strong persuasion or belief.
When I first began writing for Seeking Alpha in February, I made mention a few times that conviction was important in investing, and especially so in relation to Sirius XM (SIRI). This was met with a few jeers from those bearish on the company who were screaming "Sell Sell Sell" at the top of their lungs as shares traded around the $2 mark.
My advice at the time? It didn't matter what the current pricing was, as all prices in that range would look extremely attractive at some point in 2012, and that shares would very likely hit my fair value target of $2.75.
In pre market trading, Sirius XM did just that. $2.75 has been hit and conviction has paid off in spades. Those who bought as the stock traded at $1.80 are now sitting at over 50% return in a few short months. Those who tuned out the noise, and tuned out the nonsense from the uninformed and uneducated, now sit with healthy profits. It doesn't matter when you purchased this year, every single person who did is currently looking at a gain.
And this is why conviction is so important for investors. Read, decide, invest. It's right at the top and is Seeking Alpha's motto. If you don't have a strong belief in your actions you are more likely to lose faith and falter when things do not go your way in the short term, rather than sticking to your long term views. Those without conviction will succumb to the current trend when the current trend goes against the grain of their beliefs. Those with conviction view opposing trends as buying opportunities, and assuming they have done their due diligence, and have made the correct choice, will find themselves far ahead of the pack in the long run.
With Sirius XM, conviction that the company is a good investment and that the share price will continue to post gains year over year, is easy. You can get caught up in the little things, and worry about this number or that, or worry that Apple (AAPL), Pandora (P), or even Liberty's (LMCA) actions will somehow destroy the company and subsequently the stock. Or you can focus on the company and reality, and the things that matter now. Increasing subscriber additions and year after year of beating guidance, improving cash flow, lower debt, and stable churn have been the norm. This doesn't look to be changing anytime soon.
Having hit the magic number, I find myself considering what Sirius XM has in store for the future. Does reaching a $2.75 target from February justify selling the stock now in October? At this point I don't think it does. 2013 guidance will be released soon, and if you have the same expectations that I do you are expecting upward revised guidance for 2012 to come in with Sirius XM's third quarter conference call on October 30th on the back of strong auto sales. I think investors would do well to continue to hold at least until numbers from Q3 are known.
Do investors have to remain vigilant to potential headwinds? Of course. But investors should also put some weight behind what drove them to purchase the stock in the first place. Certainly they should put more weight behind that than some random opinions and wild speculation they read from individuals who have proven, quite frankly, that they have no clue what they are talking about.
Conviction is and will continue to be important going forward. If history is any indication, there will be no shortage of those who decide Sirius XM is the "number one short." If history is any indication, those individuals will continue to be wrong.
In a piece from Monday titled "Why It's Time To Sell Sirius XM And Pandora" Richard Saintvilus from The Street begins with
"Conviction" is overrated.
Is it really, Richard?
Hold on to your conviction and stay the course. It's worked out extremely well for those who have, and will continue to work extremely well for those who do.