Tim Brown: Think About Getting Sirius

Tim Brown

A lot of my picks have been for tried-and-true companies -- companies you have probably all heard of that have solid balance sheets and somewhat predictable long-term performance. They are good companies that have been solid and will be solid over the years. However, today's pick is a little different.

In football, you have to take a shot downfield every once in a while and go for the big play. In investing, in order to really make a killing, it helps to find a stock that is not only undervalued but also cheap. Yes, you often have greater risk, but the upside can be much greater as well. Again, it's just like on the gridiron. If you throw a "Hail Mary," the other team often comes down with the ball, or at the very least, the defense manages to break up that heave. However, once in a while, it works. You have to pick the right spot, and in this case, the right company.

While I don't view Sirius XM Radio(SIRI) as a Hail Mary play, I do believe it is a pick that gives me a lot of potential upside.

First, the merger between Sirius and XM should undoubtedly help the two companies achieve economies of scale. It should help put both businesses in better shape and streamline their offerings and reduce overhead. The books are not pretty at Sirius, but they aren't as bad as a lot of people say.

And there are reasons to be encouraged. This company is still fairly early on in its corporate life span. Other similar industries took many years to break out of the red, and the costs at the beginning clearly are weighing on people's minds right now. But down the road, the infrastructure will be in place, and many of the startup costs will no longer be as big a factor.

I've also been reading a lot lately about the government's possible stimulus package. That could help companies like Sirius, because consumers will have more disposable cash, and the radio services are not prohibitively expensive. They are at a price where people won't have to think long and hard before making such a buy.

Lastly, the stock weathered last week's storm pretty well and actually closed the week 12 cents higher than it opened on Monday. This week, the stock dropped back down to 89 cents on Monday and continued to slide a bit on Tuesday as well. In afternoon trading, the stock was trading near 86 cents a share. That's not a lot, and if you want to take a risk for a potentially sizable reward, Sirius is a good play.

Keep moving the chains!

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