Cramer: Use Sirius Bonds to Play the Other Side

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If you like Sirius(SIRI Quote), do not play the common stock. The bonds are the best bet. Not that long ago, in the summer, Barclays put out a terrific piece about the 3.25% Sirius converts due 2011. These converts, which currently sell at 88, could be a great play on any turn, because they will get paid off at a nice gain.

Barclays likes it because there is no other Sirius debt due ahead of it, and if it gets in trouble, Liberty Media(LINTA Quote), the new investor that injected capital, will make that debt good, because bankruptcy wrecks the principal asset that SIRI brings to the table: its gigantic operating loss.

I am also drawn to the 9.625% notes that mature in 2013, a piece of paper that has zoomed in value since the decent quarter Sirius posted, and which trades more actively than all other bonds. These trade at 94 and yield 11.65%.

Why not the common? For many of the reasons detailed here by others: massive dilution, unlikely to produce an actual profit and more likely to do nothing as the bonds pay off no matter what happens to the operation. I also believe that if there is any upside to the common, it will be taken by Liberty, which, historically, is a very greedy partner.

At the time of publication, Cramer had no positions in stocks mentioned.