Sirius (SIRI) reports earnings on Thursday. Wall Street does not know what to expect from this NASDAQ stock, which has had a rollercoaster of a ride this year.

The short position is rising, and currently stands at 4.7%. The price has been stable, but trade is thin. However, a number of related stocks - Emmis Communications (EMMS), Entercom Communications (ETM), and Cumulus Media (CMLS) have all been strong price performers in the past few days.

October 2009: S&P -1.98%

October 2009: OSV 10.18%

It turns out that value investing is something that is in your blood. There are people who just don’t have the patience and discipline to do it, and there are people who do. So it leads me to think it’s genetic. - Seth Klarman

In 2Q09, advertising spending in the U.S. declined in the high teens according to most estimates, with all advertising media, except theater advertising, declining year-over-year. Yes, even Internet advertising declined y/y due to weak branded advertising and less than robust search growth. According to my calculations, Google’s (GOOG) domestic search business actually declined y/y by approximately 1-2%. Therefore, even overall search advertising declined y/y given that Google has a lion share of the domestic search market and exhibits the strongest search fundamentals.

At a series of conferences this past week, several companies reported that advertising is still challenging but is however firming, with month-over-month improvement in national and local advertising and improvements in auto advertising.

In this post is a list of 24 stocks, which have broken out to the upside on big volume. The stocks listed in this post have experienced very unusual volume. I believe stocks which have broken out like this are at least worth adding to the watch list. However I must say the technicals on these stocks are not as bullish as they've been in the previous weeks, which may be a hint that a short term correction is near. If the market continues to rally however, these stocks should continue demonstrate strength in my opinion.

As stated at the bottom of this post, I've picked two stocks from the list which I may be speculating with in the weeks to come. A month ago I chose to speculate with STEC Inc. (STEC) using call options. The results from the trade can be read here. A couple weeks ago, I chose to speculate with a stock LaserCard (LCRD). The results from that trade can be read here.

Radio broadcasting companies, an out-of-favor sector with investors and media consumers, are extremely leveraged and facing a difficult business environment.

With the advent of the internet, audio related media distribution barriers to entry have come down dramatically. The dissemination of news has encountered a paradigm shift with the advent of blogs, including the one owned by yours truly. With arguably better content, easier and more customizable access, and a rapidly changing business model that is difficult to grasp by the traditional MSM (mainstream media) management, the Web has literally painted a R.I.P. sign on the coffin covers of many a once-mighty radio station holding company. Are TV station companies next? Did this truly have to come to pass, or was the changing of the guard inevitable? Should Bloomberg, or Murdoch or Curtco Media buy a stake in BoomBustBlog.com to hedge their future?

F2Q09 Earnings Call

October 10, 2008 9:00 am ET

Off-Air (non-spot) revenue has surpassed last year’s midyear forecast by the Radio Advertising Bureau [RAB], and is expected to approach $2B by the end of 2008 - nearly a full year ahead of the projected timeline, the RAB reported.

At 9% of radio’s total revenue, off-air is composed primarily of online activity, followed closely by experiential marketing partnerships. Off-air revenues in the first half of 2008 were up 12% from the year-earlier period - the only sector other than network (up 3%) to record gains:

F1Q09 Earnings Call

July 10, 2008 9:00 am ET

F4Q08 Earnings Call

May 12, 2008 9:00 am ET

Today's Markets

• In Asia, markets closed to the upside Monday. The Nikkei gained 0.64% to 13,743. Shanghai +0.37% to 3,626. BSE Sensex +0.74% to 16,861. Hang Seng was closed.
• European markets are higher at midday. FTSE +0.44% to 6,231. CAC +0.71% to 4,996. DAX +0.55% to 7,041.
• U.S. futures are up at 7:20 AM. Dow +0.23% to 12,773. S&P +0.29% to 1,393. Nasdaq +0.22% to 1,967.50.
• Gold is down 0.2% to $884. Oil is down 0.58% to $125.22.

Earnings: Monday Before Open

• Cogent (COGT): Sees Q1 EPS of $0.09, better than consensus of $0.08. Sees revenue of $24.6M vs. consensus $23M. Raises full-year revenue view to $125M vs. consensus $118.8M.
• Emmis Broadcasting (EMMS): FQ4 EPS of -$0.28 misses consensus of -$0.17. Revenue of $85.8M vs. consensus $76.5M.
• Holly Corp. (HOC): Q1 EPS of $0.17 beats consensus of $0.15. Revenue of $1.48B vs. consensus of $1.35B.
• IMAX Corp (IMAX): Q1 EPS of -$0.25 misses consensus of -$0.14. Revenue of $23.5M vs. consensus of $25.4M.
• IndyMac (IMB): Q1 EPS of -$2.27 misses consensus of -$1.92.
• MBIA (MBI): Q1 EPS of -$3.01 misses consensus of -$0.19. Revenue of -$2.96B vs. consensus of $718.62M. MBIA said it has $3.58B of unrealized losses from derivatives.
• PMI Group (PMI): Q1 EPS of -$3.37 misses consensus of -$1.96. Revenue of $316M vs. consensus $289M.
• Sprint Nextel (S): Q1 EPS of $0.04 beats consensus of $0.02. Revenue of $9.33B vs. consensus of $9.41B. Sprint Sees improved post-paid customer churn rate in Q2, and sees net post-paid subscriber losses improving marginally vs. Q1.
• Stifel Financial (SF): Q1 EPS of $1.03 beats consensus of $0.89. Revenue of $211.5M vs. consensus of $197M.

As I do every day, on March 18^th I received a breaking news email from Inside Radio. To me, the three headline stories for the day pretty much sum up the entire state of the radio industry right now. I have discussed my thoughts on all three in depth in other Seeking Alpha commentary, but they definitely fall into the categories of the Good, the Bad and the Ugly.

The Good:

I can’t tell if Jim Cramer really hates radio stocks or if he just desperately wants the Sirius (SIRI) and XM (XMSR) merger to be completed and is boycotting the broadcasters out of spite. I am a big fan of Cramer, and though I think he’s wrong about the general state of radio broadcasters I do agree with him that the satellite merger should go through. Broadcast radio simply has nothing to fear from a consolidated XM and Sirius, and should stop trying to block this merger.

I may be the only person connected to the radio industry who thinks this, but in my opinion it’s a completely hypocritical position that the broadcast radio industry has taken here. The industry can’t credibly argue for less ownership restrictions of its own and push for cross ownership with newspapers and then argue that consolidation in another sector is anti-competitive. Terrestrial radio and satellite radio have such different business models and competitive nuances that broadcasters can easily compete with a merged satellite radio operator. In many ways, they could even find ways to work together for everyone’s betterment.

Internet radio appears to be stuck in the mud right now. The concept holds such promise as more and more devices become Wi-Fi and Wi-Max enabled, and is particularly exciting for cars where more than 1/3 of radio listening is estimated to occur. For the cost of your internet connection or in some cases a modest subscription fee, one can have any variety of music or other content from all over the world.

Unfortunately, it’s not getting much traction from users, and those users who have discovered the medium seem to have not settled on any favorites in the sector yet.

As I was reading Warren Buffett’s latest annual letter to Berkshire Hathaway, Inc. (BRK.A) (BRK.B) shareholders (to anyone who hasn’t, it’s a must-read), I was fascinated by his description of what types of companies he looks to acquire. He categorizes companies into three groups that he dubs “The Great, the Good and the Gruesome”.

Of the “Great Ones”, Mr. Buffett says he and his longtime partner, Charlie Munger, “look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.”

In their cover story this week, Barron's identifies a handful of industries and companies where “investors who play their cards right could see big payoffs in debt-laden companies whose shares have been pummeled in recent months”.

One of the areas they feature is operators of radio and television stations, considering these levered equity plays with stocks that “could rebound sharply when the credit climate improves”.

I was asked recently by a SeekingAlpha.com reader why so many of my articles focus on the radio sector when in actuality the bulk of my career has been spent in television. It was a good question, and I think the answer will help explain why I think the death of radio stocks has been greatly exaggerated.

While the end game in broadcast radio and television is basically the same- achieving ratings to sell advertising spots- the means by which they get there could not be more different. As a media executive, radio is a far more interesting sector to be in right now as it has a lot more moving parts. The radio medium is much more targeted, more dynamic, and there is much greater control over a company’s destiny than in television right now. Radio is also a much more tactical medium as a result, and constant research and development is imperative for success. These are all elements that will help it survive and thrive again in the digital world, once it gets beyond the current trough the industry is experiencing.

One of the largest items hanging over the radio industry right now is the looming addition of a performance royalty payment from broadcasters to recording artists being pushed forward under the banner of MusicFirst, an acronym standing for “Music Fairness In Radio Starting Today”. MusicFirst is backed by a coalition of musicians, the Recording Industry Association of America, Sound Exchange, and a number of other organizations and unions who support the interests of performance artists.

Historically, composers of music have received copyright royalties from all exhibitions of their music through organizations such as ASCAP, BMI and SESAC, but performers of those musical compositions on the other hand only receive payment for certain exhibitions of their works. The biggest carve out from these royalties historically has been use of a performer’s music on broadcast radio stations, a practice in which the United States is generally out of step with many other developed nations.

As the radio industry heads into the thick of its earnings releases over the next week or so, the market seems to already be predicting 2008 will be a pretty awful year for the sector. To date, fourth quarter 2007 results have been released by industry heavy weights Clear Channel (CCU), Emmis (EMMS), Entercom (ETM) and Radio One (ROIAK), and CBS Corporation (CBS) is scheduled to release on February 26th. While the story on CBS will largely be the impact of the writer’s strike on its television network, it has a sizable large market radio group that is in the midst of an operational turnaround important to not only the company but also the health of the industry overall.

So far, all seem to have consistent stories with the focus shifting to 2008’s dismal forecast. This goes against general conventional thinking as this year holds two significant advertising events- the U.S. Presidential election spending and Olympic advertising, which in prior cycles generally fueled significant annual growth rates for traditional media. More importantly though, what isn’t being discussed much is that these forecasts start to raise serious alarms for 2009 when those quadrennial events won’t be around to lend support to the sector.

Fortune Magazine recently released its annual list of “100 Best Companies to Work For”, and for the third year in a row, not a single traditional media company makes the list. Repeating last year’s honors, Google (GOOG) again tops this year’s list that seems to contain a wide sampling of all industries including tech, financial services, retail, hotel chains, accounting firms, healthcare, and even homebuilders… pretty much everyone but traditional media and entertainment companies.