Amazon.com, Inc. (AMZN), Cisco Systems, Inc. (CSCO) & Three Equities That Defy Reason

3. Back from the edge, stuck in a rut

I wanted to find something I hadn’t written about for the third one, and I have landed on Sirius XM Radio Inc (NASDAQ:SIRI). Sirius XM Radio Inc (NASDAQ:SIRI) was one of my first investments ever. I think it was 2006 or 2007 when the price was right around $1. In my opinion, Sirius XM Radio Inc (NASDAQ:SIRI) defies reason because it managed to pull itself up from the brink in an amazing turnaround. However, despite that and some solid looking fundamentals, it is trading lower than I would expect. In a market where Netflix, Inc. (NASDAQ:NFLX) makes an insane move every few weeks, Sirius stands flat.

The company has its share of issues, but flat is the last thing I would expect. I would expect it to be rising with its steadily increasing revenue and its P/E around 6. The company also as a PEG ratio of 0.0094 and ample cash, which is a strong foundation and the potential for massive growth compared to the current share price. On the downside, I see inconsistent earnings. Sure they are positive, but they are not increasing regularly.

The increasing revenue signals to me that Sirius is a buy. The ample cash provides a nice net for the company to absorb the cost of expansion. I think Sirius is well on its way to becoming mainstream as people accept getting subscriptions for high quality content as the norm, even when there is a free alternative such as traditional radio. Echoing that, the company added 2 million subscribers in 2012, and that is the highest in one year since 2007.

Conclusion

Defying reason does not mean that there is a legendary trade, but these stocks strike me as strange in some way. Cisco Systems, Inc. (NASDAQ:CSCO) is probably the most boring on the list, but it has been in its current range for far too long. Cisco is a strong company and I think it is overdue for a run.

Amazon.com, Inc. (NASDAQ:AMZN) is not something I can understand with the tools available to me. If I were to risk a position on Amazon.com, Inc. (NASDAQ:AMZN), I would have it backed up by owning puts, but my fear stems from a lack of understanding, not from anything specific. The extra cost of the premiums is probably worth the security. It would cost quite a bit though. Sirius is only strange in light of the current environment that tends to be extremely volatile, but the company impresses me with its return from sub-$1 and rising revenue.

The article 3 Stocks That Defy Reason originally appeared on Fool.com and is written by Nihar Patel.

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