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Media, Entertainment, and Communications Stocks Still Leading the Market Rally


Easy monetary policy in the US and Europe and confirmation of mostly good fundamental business trends leave investors bullish.

September has been an interesting month for investors in entertainment and media stocks. The fall TV season began and Bank of America Merrill Lynch and Goldman Sachs hosted conferences. This year we also have a political season and quite a bit of macro news in Europe and the United States, highlighted by actions of the European Central Bank and the Federal Reserve.

My interpretation of the news flow for media and communications stocks was generally positive. Investors seemed to agree as almost all the entertainment stocks and many cable, telco, and satellite stocks have reached 52-week and multi-year highs in September. Some are making those highs today.

Besides a strong market at multi-year highs, I think the main driver of the upside in the shares has been the macro news. Conference presentations were generally bullish, but I found the tone to be somewhat cautious. The European Central Bank announced it would aggressively buy short-term debt of troubled sovereign nations. Without being named, Spain and Italy are the targets. Eliminating financing risk for these countries for several years reduces the downside from the sovereign debt crisis. Or at least it delays the downside. Less downside equals less risk which frees investors to take more risk and buy stocks with sensitivity to the global economy. Certainly, the big entertainment conglomerates qualify.
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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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