12/13/05 Sirius Satellite rant

...As I write this mid-session, shares of Sirius (SIRI) are down over 4% due mainly to a downgrade from the Banc of America analyst who lowered them from neutral to sell. First of all, I don't own any shares of SIRI or its main rival XM Satellite Radio (XMSR). If I were to own one, it would be XMSR because I think it is a better value, if either one of them is, and because I am uncomfortable with all the hoopla surrounding on-air personalities at Sirius and the expectation that they will be challenging the limits of indecency on the air in the future. But that's just me. There are thousands of stocks out there, and I don't have to own anything that makes me uncomfortable or doesn't suit me. I do follow SIRI on a semi-regular basis because I have two friends who are in it.
...As far as the valuation issue, and I agree with him on this, the BAC analyst lowered his price target for SIRI to $5.50. It closed last night $7.46, so you can see that would be quite a haircut. On the flip side, he has a target of $40 for XMSR, which closed last night at $29.96. He is advising investors to sell SIRI and buy XMSR. XMSR, he says, has about twice as many subscribers as SIRI, but its market cap is about 20% less. Here at mid-day, SIRI has already traded well over 50 million shares. According to Yahoo Finance it averages about 41 million shares a day in an entire session.
...Here's what I don't get. Why should anybody care about what an analyst says? If you are an investor in SIRI on a fundamental basis, you should already have known about these numbers. Otherwise, why were you in it? And if you already knew about the numbers, then why would you bail now or care what anybody says about it?
...As I stated a few days ago, Kiplinger's magazine was commenting about how some brokerage houses have an agenda when they make recommendations. Some won't recommend stocks for purchase unless they are paid to do so. I am certainly not saying that is what is going on here. I have no knowledge of BAC or this analyst and would not make any such accusation. He might be the best analyst out there for all I know. This rant is not about him.
...But even if he is the best, he might be wrong. So here's the point. You should be in a trade based on your own decisions, whether right or wrong. You should be doing your own homework. When somebody pumps or disses a stock, that doesn't mean that they are right. And you don't know if they are on the up and up or not, or whether they might have some sort of agenda. I'm constantly amazed by people who see somebody tout a stock (for free) on one of the cable shows, then run out and buy the stock, only to see it gap up the next day, then crash after all the lemmings get theirs. Day after day it happens, but it seems that people don't learn. They want a guru. I am dumbfounded when I listen to an expert guest tout a stock, meanwhile in this age of disclosure, the printed data on the screen carries the disclosure information that the guest doesn't own any of the stock he is touting, his company doesn't own any of it, his clients don't own any of it, his family doesn't own any of it, but he thinks it's a buy. Amazing. Wouldn't you rather hear him talking about something he does own? Wouldn't that be a better opinion? And just once I would like to hear the commentator ask the guest, "If you like it so much, why don't you or your company or anybody you know own any of it?" Now that would be good tv.
...Since I'm ranting (no more coffee today), SIRI also brings up another point. I am also constantly surprised by the number of people who love low priced stocks. Not inexpensive, they may be wildly overpriced at the cheap price, just a nice low single digit number, the lower the better. I have always thought that is one of SIRI's attractions to a lot of people. They don't realize that it is actually more expensive than XMSR - it just has so many more shares that the price of a single share looks lower.
...For the most part, when all things are equal, shares of a low priced stock are where they are for a reason. If there were a demand for those shares, they would trade higher. But everybody likes to feel like they are getting a bargain. This isn't Wal-Mart, folks. And a thousand dollars of a stock is a thousand dollars of a stock, whether its 10 shares of a $100 stock, 100 shares of a $10 stock, or 1000 shares of a $1 stock. As Mr. O'Neil of IBD fame puts it, if you were building a baseball team, would you want a bunch of .240 hitters because you could get them cheaper, or would you rather have some all-stars. Same thing in the market.
...One last thing regarding today's action in SIRI. It makes me wonder how many people are just in the trade because it is low priced (in their estimation) and hot, and they have had their fingers on the trigger, figuring they would try and make money now and race everybody for the exit door when the music stopped. If I were a true believer in SIRI, I would be using days like today to add to my position, not bail. But I'm not in it one way or the other, and won't be, so I just watch and enjoy the show.
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