Vanguard/MFC Global Add to Their Positions In Sirius XM Radio

By Relmor Demitrius -

As reported in recent weeks, institutional ownership in shares of Sirius XM Radio (NASDAQ:SIRI) have been increasing.  This is especially significant due to the distressed price levels the equity was experiencing and institutional interest in a stock that is bottoming is crucial in gauging street sentiment going forward.  Basically the thinking is this,  if an institution doesn’t want to buy a stock when its under $1, maybe you shouldn’t either.

As these reports are sometimes not arriving until 2 months or more after the actual purchase of the stock, it would behoove one to be careful and diligent when interpreting this information.  Many factors should also be considered when looking at an institutional ownership report.  What was the price action during that period versus current prices?  Was the stock in an uptrend or downtrend? What does the fund do?  Is this fund the end holder?  Do they tend to trade or invest in the company?  What is this funds trading pattern with the equity?  As you can see this is no exact science.

Reports from Q4 institutional holdings are now arriving.  I try to focus only on the top holders, and in this equity I am looking at institutions who hold more than 10 million shares.

Vanguard Group, Inc. has added 6.3 million shares in the fourth quarter of 2009.  They already held 153 million shares before this addition in Q4, and were their largest shareholder, not counting of course the 40% preferred stake Liberty Media, through Liberty Capital (Nasdaq:LCAPA) owns in the company.

Vanguard first added large amounts of shares in Sirius XM Radio on the Q3 report in 2008, well after the merger financing was known about, and before so many recent improvements in the balance sheet have been made.  Vanguard was a believer apparently in the business model of the combined companies from day 1.

They have added shares in every quarter since the 3rd quarter of 2008.  Vanguard is a highly regarded fund, known for its long term and structured approach to investing.  Definitely bodes well for the future of the company if funds like this are bullish.

MFC Global Investment Management, LLC added 44 million shares in the fourth quarter of 2009.  They previously were the companies second largest shareholder, but this acquisition spring boards them to number 1, with 4.17% of the float.  Since no institution can acquire more than 4.8% without triggering Sirius XM’s poison pill, this would indicate a possible maximum or near maximum ownership level.  To me, this shows that the institution is sold on the business model, the equity has survived, and is a solid company going forward.  Once again, it is nice to see institutions buying a stock when it is bottoming.

MFC Global first began buying shares in the third quarter of 2008, and has pretty much been acquiring steady every quarter since.

OppenheimerFunds, Inc. sold 684,000 shares from an existing position of over 82 million shares.  They did not add any shares in Q4, but obviously that sell was more than likely for some type of tax reasons, and is no indication of loss of sentiment.  They are the fourth largest shareholder.

Apollo Management is the third largest stockholder, and as usual, had no change in the position.

In the next group of holders there were some new additions to the over 10 million club.  Act II Management purchased a new position in Q4 for 10 million shares even.  This fund must have known about my exclusive 10 million share club, and demanded immediate entry.

A notable fund that dropped off the over 10 million is Putnam Investment Management, which sold 13 million shares in Q4, but still left them with almost 6 million shares remaining.  As a possible reported large holder of Sirius XM debt, this sell could possibly be from moving bonds, refinancing bonds, or closing out hedged positions on them.  It could have also been done if these bonds were paid back for instance.  If they don’t need to short the stock, they would no longer need the shares. More indication that most of the large amount of selling done in Q4, but remember, overall, institutions added more shares than sold in Q4, could have been bond related, as Barclays was one also that did shave, and other banks as well.

Accumulation of a stock can take time.  As we are seeing, when a stock comes from extremely low institutional levels back into accumulation mode, the process can be slow.  This fund can sell to that fund, the timing can be manipulated on how they report, and this is by no means a sure fire measure of a stocks success.  Just another piece of the Sirius XM puzzle to keep in your sights.  One cannot learn the full picture and story from these reports, but it beats reading the future by scattering chicken bones.