Pulling out of Index Funds?
In last Tuesday’s article, I talked about John Mauldin’s book Bull’s Eye Investing which speculates that we are in the beginning of a secular bear market. I’m just now getting to the part of the book where he talks about what to do about that situation. Among other things, Mauldin suggests buying small-cap stocks for value. Ben Stein suggests this kind of investing in any market: Want Big Returns? Think Small by Ben Stein.
SIRI is Downgraded After a Recent High
I was getting snug in my SIRI investment. Then some bozo at Bank of America downgraded the stock from “neutral” to “sell”.
Jacoby noted that XM’s enterprise value is 20% smaller than Sirius, despite having about twice as many subscribers.
Using the current subscriber numbers to evaluate XM and SIRI is flawed in my opinion. For one, it assumes that both companies will grow their subscriber bases at the same rate. Remember that XM had a huge head start on Sirius before we found out that Sirius was going to be better at securing CONTENT. Why am I okay with the fact that SIRI has a higher valuation that XM? Because I’m not buying the company for its technology or its current subscribers. I bought SIRI for their media. Most notably there is Howard Stern, but there’s also Martha Stewart, the NFL, and the NBA on Sirius’ roster… and many many more.
The current momentum due to Howard Stern’s arrival will enable SIRI to reach XM level numbers for subscribers. At that point XM won’t have the “peer power” that it does now. People will be as likely to buy an XM radio as a Sirius radio if they’re buying because their friends have it. What will matter is who has the content and who has the auto deals. Who has the content? Sirius. And who do you think the auto makers will deal with? The guy with the best content. If the stock drops low enough, I may pick up a few more shares.