In a story covered by USA Today, a Nashville investment advisory company, Shayne & Co., is garnering fame from the web 2.0 world by doing a parody about hedge funds, and the crisis some people find themselves in. Hedge Funds are a popular investment vehicle that have potential to wield a lot of power on the street, and because they are private, their strategies and activities can sometimes take the street by surprise. If you are invested in an equity that has the hedge funds on your side, you can be a very happy investor, but if the hedges are opposite of your position, you can find yourself wondering what went wrong.
So how does the average investor diversify and minimize risk? There are many strategies to this, but the most common seems to be getting into mutual funds. How does a SDARS investor who wants a play on satellite radio minimize risk? Well, one suggestion is playing stocks that have an involvement in the satellite radio sector, but also participate in other areas as well. RF Monolithics, ST Microelectronics, Sirenza, and Direceted Electronics are examples of companies that have part, but not all of their business geared towards satellite radio.
With the merger of Sirius and XM being the driver of the SDARS stocks, there is indeed uncertainty as to what exactly will happen to these equities in the near future. The bulls believe that the merger will propel satellite radio into the next step towards profits, and that synergies will make the business model much more bottom line friendly. The bears question whether both companies can survive without a merger. With frustrating performance for over a year, people are wondering whether the merger can finally propel satellite radio into an arena where quarterly gains are reported instead of losses. Many investors who had stepped to the sidelines in the past two years still follow the sector closely in hopes of being ready to make a leap if satellite radio is indeed going to take the next step. Some investors still participate in the sector by getting involved with derivative stock plays such as ST Micro and Directed Electronics (Directed's new Polk Audio iSonic device is closely linked to HD Radio and iPods thus, a company such as Directed is involved not only with satellite, but HD and iPods as well). Whatever the positions, there can be little doubt that the next couple of months will see big news one way or the other regarding satellite radio merger.One point that is clear in the video is that investors need to be very careful in their investment decisions, and understand the risks involved in these markets. Even the most well done research into an equity, or the coolest product out there, can become meaningless if the big boys are not on your side.There are many moving parts involved in this sector right now, and having government agencies (FCC and DOJ) holding one of those parts adds many things for investors to consider.
Position - Long Sirius, Long XM, Long Directed, No Position RFMI, ST Micro, Sirenza.