This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sirius XM Gets Hedge Fund Love

BOSTON ( TheStreet) -- It took a 1,400% rise in the shares of Sirius XM (SIRI - Get Report) for hedge funds and institutional investors to turn bullish on the satellite-radio company.

Sirius XM Chief Executive Officer Mel Karmazin recently said the company is "no longer a long-shot concept and company," and big-money investors agree. During the fourth quarter, institutional investors' increased positions in Sirius XM outpaced decreases by a count of 99 to 69. New stakes totaled 48 compared with 29 who sold out of the stock.
Mel Karmazin, CEO of Sirius XM

Hedge fund managers are raising their stakes in Sirius XM. Eighteen hedge funds added to current positions or established new ones, including heavyweights like Steven Cohen's SAC Capital Advisors and Shumway Capital. Ten hedge funds trimmed positions while only three completely sold out.

Institutional ownership accounts for only 33% of Sirius XM's outstanding shares, with more than 64% in the hands of individual investors, according to data compiled by Capital IQ. That compares to institutional ownership totals of 75% for JPMorgan Chase (JPM), 71% for Apple (AAPL) and 63% for Google (GOOG). Many stocks that trade below $5, such as Sirius XM, typically don't see high institutional ownership. Many mutual funds, for instance, have charter rules that prohibit ownership of stocks below a certain price level.

What makes the institutional purchases significant is the fact that shares of Sirius XM are up 15-fold since the lows of February 2009, when the company briefly flirted with bankruptcy before Liberty Media (LCAPA) stepped in with a lifeline. The stock is hovering near a 52-week high of $1.88 a share, the highest since before the financial crisis hit in late 2008. Institutional buyers, it seems, expect the stock to continue to climb.

Sirius XM has rebounded along with car sales. While Sirius XM does have a retail side of the business, the company gets its biggest boost from radio units installed by manufacturers like Ford (F) and General Motors (GM). Sirius XM offers new-car buyers a trial subscription and then works to convert those trials to paid subscriptions.

The improvement is shown in the company's key metrics. In Sirius XM's fourth-quarter 2008 report, subscribers totaled 19 million and the conversation rate of trial subscribers was a weak 44.2%. Average revenue per user was $10.60, while subscriber acquisition costs totaled $70. By comparison, Sirius XM ended last year with more than 20 million subscribers and a conversion rate that inched up to 45.1%. Average revenue per user climbed to $11.80 in the fourth quarter 2010, and subscriber acquisition costs dropped to $58.

Analysts are predicting that Sirius XM's share price will continue to ascend. Firms like Barrington Research and Wunderlich Securities, among others, increased their price targets on shares of Sirius XM. The stock is still well below the premerger share price of $4 but analysts, like hedge funds, still see some more room to run.

The following pages detail 10 hedge funds that initiated new positions in Sirius XM during the fourth quarter, ranked by share count, as well as what the funds were also buying and selling.
1 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SIRI $3.97 0.51%
AAPL $93.84 0.11%
FB $117.75 0.14%
GOOG $698.21 0.75%
TSLA $238.50 -0.94%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs