Get Seeking Alpha user bassfisher3k a comfortable chair to sit down in! I'm concerned for his safety, as Sirius XM (NASDAQ:SIRI) continues to hit new high after new high.
He also keeps requesting to be pinched. I'll let someone else handle that. I'll go get the chair.
What bassfisher3k is referring to is the string of winning days and weeks that Sirius XM's share price has seen since the low points just four months ago in the $1.80s. A 65% appreciation in just four months from those lows -- on a stock which was receiving doom and gloom opinions and off-the-wall negative speculations -- is nothing to be taken lightly.
While share prices took a bit of a pullback in the afternoon, this is healthy behavior. A quick look at money flows over at avafin.com shows a net influx of $173 million into the stock, and of $98 million on trades over 10,000 shares. It indicates lots of buying, and lots of big buys. Over 70% of shares have traded on the ask vs. the bid. This points towards heavy accumulation, and in my opinion, some rather big players have been upping their stakes in Sirius XM in the more recent sessions.
While the proof on that will not be known until institutional activity for Q4 2012 is released next year, investors should keep a sharp eye out for confirmation of this when it becomes available. "Smart money" is not always smart, but there's a reason those investors retain that moniker. They are generally smarter than the average investor, and jumping in when they do (rather than waiting and following their lead) can be a wise move.
Why would so many be jumping in? The simple answer is Liberty Media's (LMCA) pursuit of control and the fact that the first order of business is likely to be share buybacks. Certainly there is no shortage of news about this, and I hinted that share buybacks were on deck way back in July as shares traded near $2. As we near Sirius XM's October 30 Q3 conference call, details of a potential buyback plan should be talked about.
I think investors are expecting this. I hope that Sirius XM does not disappoint. It is already known that net additions to subscribers were a large beat over estimations and that guidance has been again upped from 1.6 million net additions to 1.8 million net additions. I don't think that alone is enough to continue to push the share price, though, and I think some serious expectations are on the plate for that Q3 call.
Investors need to be aware of this. I'd prefer not to be a preacher of doom and gloom myself, but current share price levels and the fact that they have appreciated at such a rapid pace impart a bit of caution to my mind. While my long-term view of Sirius XM is fully intact, and while I see the share price appreciating beyond $4 per share in 2013, I think investors should prepare themselves before the call. What will matter are Street expectations, and whether or not they are met.
I will say this. Mel Karmazin, who has just completed sales of stock under his trading plan this week, rarely disappoints the Street. I find it likely that his trend of upside surprises will continue, and that lets me rest a bit easier before the conference call.
Disclosure: I am long SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.