Goldman Sachs SIRIously Bullish

By Brandon Matthews

It’s been a long time since Goldman Sachs (NYSE: GS) provided a public opinion on Sirius XM Radio (Nasdaq: SIRI), and quite frankly nothing has changed in that regard. The absence of analyst coverage from the firm prompts me to look into SEC filings now and again to see what position Goldman is taking when it comes to Sirius XM.

It’s been a while since I reported on Goldman’s Sirius XM activity and we have some new positions to report on. At last check, Goldman was holding 1,447,107 shares of Sirius XM and a few hundred thousand call options. This alone could be seen as a bullish position on Sirius XM, yet these numbers are relatively small when considering Goldman’s total portfolio.

Since that time, Goldman Sachs made a rather substantial purchase of $10,250,000 Sirius XM’s 3-1/4 convertible notes due 2011 sometime between August and November of 2009. Coincidentally, these were the same bonds I highlighted as an exceptional investment opportunity in January. The interesting aspect of this CCC bond is that it's more of a long term equity play. At 3-1/4 % the interest is of little use to income investors, yet as I pointed out, the substantial underpricing of this bond can yield nearly 20% at maturity.

The other aspect of this particular bond is its $5.30 conversion price. One would have to think that Goldman Sachs took that into consideration as well. Does Goldman believe that the stock could potentially hit the bond’s conversion price prior to maturity? Seems like a stretch, but this is Goldman Sachs we are talking about and as we all know; what Goldman wants, Goldman gets.

The most recent filing covers a period from December 2009 through February 2010. During this time, the filing indicates that Goldman Sachs has added another $148,500 worth of the same 3-1/4% converts. Additionally, the firm added over 1.7 million shares of Sirius XM common to their holdings, bringing their total to 3,146,923 shares owned. Goldman continues to hold just over 298,000 in call options, and no puts.

The big picture seems to indicate that the most powerful investment firm in the world is warming up to Sirius XM Radio as a long term investment, including equity, income and options. I for one would not bet against them.

Disclosure: Long SIRI