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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.

The Federal Reserve more or less said it would maintain extremely loose monetary policy for as long as it takes the US economy to resume to normal rates of GDP growth and unemployment. Once again, this is a signal to investors to take more risk and seek alternatives to fixed income investments that will continue to provide virtually no return. Add in some hope that this even more aggressive monetary policy will work, and the outlook for the big, economically sensitive entertainment conglomerates looks more bullish.

Telco, cable, and satellite stocks benefited from these same macro factors, but they are much less cyclical businesses. Instead, they pay good dividends and are free cash flow stories. The longer interest rates stay low, the more value to the dividends and the stream of future (and highly predictable) free cash flow.

The conferences were generally bullish but I detected a note of caution in many management presentations. The caution was probably just conservatism given slowing economic growth over the summer and uncertainty about the election and future fiscal policy in the United States. However, there were some indications that advertisers are being cautious. No company lowered guidance, except for Disney (NYSE:DIS) which had a rough summer at ABC. Nevertheless, I still heard commentary about it being too early to call for a strong fourth quarter advertising market with the new TV season barely launched. It might be me, but I remember greater bullishness at these conferences the past couple of years without the qualifier that it is too early provide a reliable forecast.
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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