Renaissance Technologies manages more than $100 billion of assets.
Its Medallion fund is one of the most successful hedge funds ever.
Renaissance’s founder, Jim Simons, is an esteemed mathematician and physicist. He once won the highest honor in geometry from the American Mathematical Society.
He’s also one of the pioneers of what we call Big Data today.
He and his team have developed mathematical models that assess the statistical probabilities of stock prices.
Simons’ fund earned 66% per year from 1988 to 2018.
In 2008, while the S&P 500 Index lost 39%, his fund made 98%.
So, when Renaissance makes a move, it pays to learn more about it.
For example, in the most recent quarter, Renaissance grew its stake in a well-known streaming company by almost 150%.
Many of you are already paying for this service anyway … so why not buy its stock?
Follow the Best Hedge Fund Into This Trade
Renaissance is now the sixth-largest shareholder of Sirius XM Holdings Inc. (Nasdaq: SIRI).
Many of you are familiar with SiriusXM. It’s 24-hour, commercial-free entertainment.
Every major automaker in the U.S. installs it in its new vehicles. You can also access it on the SiriusXM app or at home on connected devices.
SiriusXM offers a broad range of music, sports, talk, news and other channels. Howard Stern is the service’s most well-known host.
Sirius XM Holdings also owns Pandora, the largest ad-supported audio streaming service in the U.S.
Together, the two services reach more than 100 million people each month.
I’m a SiriusXM subscriber myself.
If I’m in my car during the day, it’s normally on business radio, such as CNBC or Bloomberg.
If it’s the weekend, I’ll listen to music or sports radio.
And I’m just one of many who enjoy the service.
SiriusXM and Pandora have been growing. They have 40 million paying subscribers today. But they still have a lot of room to reach more ears.
And that growth provides you with an opportunity to make money.
This Company Has Serious Momentum
Sirius went public in 1994.
Take a look at its quarterly stock chart:
Sirius Is in a Steady Rise Since 2009
There are two things you should notice on this chart.
First, Sirius enjoyed a dot-com era blastoff.
Shares soared from $1.69 to as high as $66.50 by February 2000.
Second, Sirius has been in a steady uptrend since it bottomed in February 2009.
Shares are up more than 13,700% since then.
This stock has momentum.
As you can see in the following table, three of the big financial factors I check have largely been in an uptrend over the past four years:
| 2015 | 2016 | 2017 | 2018 | 2019 | |
| Revenue | $4.6 | $5.0 | $5.4 | $5.8 | $7.8 |
| EBITDA | $1.6 | $1.8 | $2.0 | $2.1 | $2.3 |
| Free Cash Flow | $1.1 | $1.5 | $1.6 | $1.5 | $1.7 |
(Source: Bloomberg; $ in billions)
And the company is super profitable. It generates $0.56 of gross profits for every dollar of sales.
Its largest expense, by far, is wages and royalties it pays to its on-air talent and those who support them.
But, as you can see in the table, that still allows for positive cash flow.
SiriusXM uses that cash to pay a small dividend … and to buy back a lot of shares.
The company has bought back more than 30% of its shares since March 2013. During that time, its sales and free cash flow per share have more than doubled.
What’s Next for SiriusXM
Another thing to like about SiriusXM is it has high potential for a corporate buyout.
The company and its more than 40 million paying subscribers would be an attractive target to a large entertainment entity.
But even if there’s no transaction, SiriusXM should continue to grow.
The stock has had a 13.2% annual return over the past seven years. And we should see even better returns than that going forward.
Last year, Sirius increased Pandora’s revenue by 28%. Its profit margins increased from 31% to 36%.
The company’s doing a solid job of monetizing the recent acquisition. It simply has more things to sell than before.
Sirius is executing well. I see value in it. And so does Renaissance.
Good investing,
Editor, Profit Line
P.S. Following the money is a proven way to make profits in the stock market. In Jeff Yastine’s and my Profit Line service, we monitor the actions of insiders and institutions. We track what they’re buying … and determine if we want to as well. Click here to learn more about our strategy.
