TWIN TRADE - A Perspective Investors Might Consider

November 10, 2006

There are many interesting theories regarding satellite radio. Some people look at subscriber numbers, others look at market cap, enterprise value, EPS, or projected earnings. All of this is done in an effort to determine which satellite radio company to invest in. I have a question.

IS THERE ANYTHING WRONG WITH INVESTING IN BOTH?

If you believe in the concept of subscriber based radio, what is so wrong with having an interest in the ONLY TWO companies in the sector? Would someone who invested in both Coke and Pepsi be regretting it today? Does an investment in GM mean that Ford is off limits?

On his show this week Jim Cramer Stated, “If you're in XM Radio, you should sell it because Sirius is the main play in this group," he said. "Sirius is not worth selling, not one bit. Sirius is worth buying."

With all due respect to Mr. Cramer, I think that perhaps he is missing at least part of the picture here. There are many things at play, but perhaps he should step back and look at the bigger picture.

The satellite radio equities have the bulk of their start up expenses behind them. They both have a good subscriber base that is growing. They both have compelling content, and they both have passionate fans and supporters. The other key consideration is that they have no other competition in the satellite delivered entertainment arena.

Considering other potential events also needs to a high priority. Setting aside a merger between the two, what are the chances that one of them gets acquired? Would that acquisition happen at a premium?

I would submit that there is a strong case for the strategy of having a bet on BOTH Sirius and XM. By doing this you have covered the sector for any short term events, and have plenty of time to measure the success of these equities going forward. I am not saying that an investment in both has to be split down the middle. There are some that will favor one company over the other because of a particular philosophy or metric. That’s great, but my opinion still rests on the bigger picture, where there are potential positives that either of these equities can have at any given time.

What is an investor to do? Cramer says sell XM and buy SIRI…..Jacoby says sell SIRI and buy XM, and there are a thousand opinions in between. Perhaps the best way to look at it all is to step back and ask yourself one question.

DO I FEEL THAT THE CONCEPT OF SATELLITE RADIO IS VIABLE?

If the answer is yes perhaps you can consider a “TWIN TRADE” and invest something into both. Yes, you may have a “favorite child”, but at least you have all of the bases covered.

11/10/2006 10:48:00 AM

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