The stock market looks set to close with 2012 as a good year despite an economic recovery that remains subpar for many American households and businesses. The S&P 500
(INDEXSP:.INX) is up almost 13%, the Nasdaq
(INDEXNASDAQ:.IXIC) is up almost 15%, and the Russell 2000
(INDEXRUSSELL:RUT) is up over 13%. Even overseas markets are having a good year, ignoring slowing growth in China and ongoing crisis in European sovereign debt. The major exchange-traded funds representing international developed and emerging markets, are each up about 14%.
Markets have rallied in 2012 against many challenges for several reasons. First, central banks around the globe, led by the Federal Reserve, have pushed interest rates to near 0%, flooded the financial with money, and purchased the supply of mortgage and sovereign debt. These actions have helped keep economies growing, engendered a housing and auto recovery in the US, kept financing costs for troubled European countries in check, and led to a massive refinancing of corporate balance sheets that has helped to support continued growth in profits and cash flow. These are all items that investors like, especially those that support corporate profits. As I have mentioned in prior columns
, the economic recovery has not been good for most individuals in developed economies. However, it has been an excellent economic recovery for corporate profits and those profits are priced daily in the stock market.
Media and communications have had an excellent year, fully participating and at times leading the gains in the US stock market. Top performing media and entertainment industries included broadcasting (up 44%), theaters (47%), diversified media (37%), cable networks (35%), and movies and entertainment (34%). Communications was up 27% overall led by cable MSOs (54%) and wireless towers (42%). Wireless telecom (39%) outperformed wireline telecom (22%) although both beat the S&P 500 easily.
A good advertising environment, supported by the recovery in autos and the Olympic and political cycles, helped media and entertainment. Communications got a boost from a search for dividend yield and an easing of profit margin pressure as upgrade policies for smartphones were tightened. Many companies were also rewarded for capital allocation strategies that favored shareholders over acquisitions and debtholders.
As of this writing, ten stocks in my firm follows in SNL’s Media and Communications indices are up 100% or more in 2012. Among these winners, only Expedia
(NYSE:S), and AOL
(NYSE:AOL) have market caps above $1 billion. Other leading large companies often mentioned in the "Dow of Steve" are eBay
(NASDAQ:EBAY) (68%), SBA Communications
(NASDAQ:SBAC) (65%), Sirius XM
(NASDAQ:SIRI) (62%), Comcast
(NASDAQ:CMCSA) (57%), Discovery Communications
(NASDAQ:DISCA) (54%), Liberty Global
(NASDAQ:LBTYA) (51%), Amazon
(NASDAQ:AMZN) (49%), and Liberty Media
(NASDAQ:LMCA) (47%). All of those stocks trade on the Nasdaq.
Over on the NYSE, besides Sprint (135%) and AOL(100%), other high winners include Lions Gate Entertainment
(NYSE:LGF) (91%), Crown Castle
(NYSE:CCI) (59%), Time Warner Cable
(NYSE:TWC) (52%), Gannett
(NYSE:GCI) (38%), Scripps Interactive
(NYSE:SNI) (35%), CBS
(NYSE:CBS) (38%), Disney
(NYSE:DIS) (33%), and Time Warner
There are still a few days left to trade in 2012 but one thing is clear. Media and communications companies were on the nice list for investors this year. No coal in the stockings of investors focused on these sectors!
Sirius XM, Comcast, Discovery Communications, Liberty Global, Liberty Media, CBS, and Lions Gate Entertainment are net long positions in the Entermedia Funds. Steve Birenberg is co-portfolio manager of Entermedia, owns a stake in Entermedia’s investment management company, and has personal monies invested in the Funds. Discovery Corporation, Liberty Global, Liberty Media, and and CBS are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor.
This column was previously published by SNL Kagan on www.snl.com.
No positions in stocks mentioned.
Entermedia is a long/short equity hedge fund focused on media, communic=
ations, and related technologies. Steve Birenberg is co-portfolio manager o=
f Entermedia, owns a stake in the Funds' investment management compan=
y, and has personal monies invested in the Funds. CBS and Discovery Communi=
cations are widely held by Northlake Capital Management, LLC, including in =
Steve Birenberg's personal accounts. Steve is sole proprietor of Nort=
hlake, a long only registered investment advisor.
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