I think it first started when I was a store manager 40 years ago. For some reason, I developed really good instincts about making a profit and investing. The company that I was with had really severe shrinkage problems in the District where I worked. They gave me the worst store in the area to manage and try to turn around. I eventually weeded out the bad guys and turned it around in a couple months. Then they hired me to train store managers to get the same results in other stores. That is when I first started investing. I started buying Exxon stock in my Profit Sharing account. I was a total novice and began to teach myself about investing.
Then I was promoted to District Auditor. For whatever reason some of the stores continued to show large losses. Long story short through a series of events I uncovered a group of upper level managers that were stealing from the company. At the same time, I also made a killing in my portfolio. Throughout the years my instincts for investing and my gut instinct for knowing who to trust has served me well. And that is why when I began investigating and investing in Sirius XM (NASDAQ:SIRI) red flags started going up.
I was looking for different stocks that were under $5. Why? Because you are much more likely to make a higher return. For example Sirius XM will go 10 times higher before a more expensive stock will. In other words Sirius will hit $18 a share before Apple (Appl) hits $4000. Of course there is risk. There is risk in any investment. But the promise of a big return outweighs the risk. I am not picking on Apple, it just shows such a dramatic example. Sirius will also hit $18 before Exxon (NYSE:XOM) hits $800.
The other thing that I always look at is institutional ownership. They will make mistakes like everyone else, but not as many. If there are a lot of funds buying a stock it will respond to the uptick and the volume and go higher. According to Daily Finance 1.61 Billion shares or 42.9 percent of Sirius XM stock is owned by Institutions. This is up 70 million shares over the last 4 months.
I trade stocks daily, and read as much as I can about different companies always looking for opportunities. It is very hard to find articles about companies that are trading under $5 a share. Most publications won't even print anything unless it is earth shattering news, such as when Howard Stern was picked to be a judge on the hit show "America's Got Talent". But as an investor of one of these stocks you continue to look anyway. Then I found several articles each day written by members of Seeking Alpha. But I kept seeing a lot of articles that were very negative about Sirius.
One article in particular was based entirely on false news. Usually I am way to busy to research someone else's research, but for whatever reason this time I did. This was the 3rd negative article by this writer and I noticed that he was Long on Pandora (NYSE:P) - Red Flags everywhere. The October 14 article started out:
When I had heard that Sirius XM (SIRI) officially released the first offering in its 2.0 line to retail, I searched for stories about the development. At first I was surprised. All I could find were random articles from loyalist longs over-hyping what's known as Sirius XM Lynx. After retrieving the details, however, it's hardly shocking that the media took a pass on the "news."
The release of "Lynx" sits somewhere south of being a non-event.
I found the picture of the Lynx that he saw from a picture showing the Best Buy logo. I then went to the Best Buy website and could not find a 2.0 Sirius Radio for sale anywhere. I investigated further and found out it was not true. The Lynx had not been released. All of us make mistakes, this is human. But when numerous people commented that the article was not based on facts, this guy ignored their comments. There was no apology from him or Seeking Alpha, and no corrections that I ever saw. The entire article was based on complete misinformation.
Then 2 weeks later, I saw this in an article by this same SA writer:
Because it deals almost solely in options, I like to take this opportunity most Fridays to update the $10,000 portfolio's positions at week's end. It also makes sense to review things because these trades represent my relatively long-term sentiment on each company. As such, it might not be wise to look at Friday's performance and enter a trade on Monday.
Option Quantity Entry Price Midpoint Price, Friday's Close Profit/Loss Apple (NASDAQ:AAPL) April 2012 $450 call 1 $19.18 $17.93 - $125 Amazon.com (NASDAQ:AMZN) April 2012 $220 call 1 $30.00 $22.60 - $740 Research in Motion (RIMM) March 2012 $20 put 30 $2.70 $2.85 + $450 Sirius XM (SIRI) March 2012 $3 put 25 $1.58 $1.20 - $950 PowerShares QQQ ETF Trust (NASDAQ:QQQ) March 2012 $50 call 1 $6.68 $10.00 + $332 Netflix (NASDAQ:NFLX) June 2012 $50 put 8 $4.50 $3.90 - $480 Pandora (P) June 2012 $15 call 9 $2.55 $2.40 - $135 TOTAL P/L - $1,648
That puts the value of the $10,000 portfolio at $21,883. Still a double by a somewhat comfortable margin.
Again, I do not have the time or the means to find every single author's portfolio and go through it to check that they are disclosing all their positions concerning a stock that they are writing about. But here it is right in front of me. A position in Sirius by the writer - a PUT. He did disclose the Pandora Long that is in the portfolio, but not the Sirius position. Is this the reason that he is writing the negative articles about Sirius? Trying to pull the stock down to make his portfolio look better?
At first I gave him the benefit of the doubt, and thought he took the position after he wrote the negative article about Lynx. But no, the articles have continued. All of them cutting down the stock and anyone that would invest in it. On a couple of occasions, I have made comments on his articles trying to correct some of the information he has written about, and my comments were removed.
At any rate, the truth about the Lynx is that it really was released this past Thursday night just as promised. On the last Sirius XM conference call, they announced that the eagerly awaited Android- based LYNX would be available by the end of the year. And just as promised it came out right under the wire. I won't bore you with the bells and whistles it has, there are pictures and articles all over the internet and on all the social sites.
And if you wanted a new Lynx radio it is already sold out. Thursday night there were rumors that Crutchfield.com had already sold out within an hour. I called them and although they would not make an official statement, they told me that thousands and thousands of people had pre-ordered it, and the shipment did not even cover all the pre-orders. That night I also checked the Sirius website, and it appeared that they still had some left. However I just checked it today and they are also completely sold out. I called to verify it, and they did confirm it, but could not tell me how many have been sold or when they will get more in.
Will this news finally push the price of Sirius XM over $2 a share? My first question to myself when I saw what the Lynx could do was: Will they be able to keep up with the demand? And now I see that this might be a red flag. A really good red flag!!
Disclosure: I am long SIRI.