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10 Multimedia Stocks With Double the S&P 500’s Gains

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Several multimedia companies’ shares are seeing returns double that of the S&P 500 this year, thanks to their U.S. focus and reliable cable and satellite subscriptions. Add to that consumers’ near-insatiable demand for news and entertainment delivered in a widening array of formats.

But it’s a competitive environment for all concerned as cable and satellite television providers are now going head-to-head with telecommunications companies to be the one-stop shop for all voice, video, and data feeds into homes and businesses.

As a result, content providers, such as news organizations and movie makers, are benefiting from this widespread demand, which is also causing a recovery in advertising revenues for the various forms of media.

S&P Capital IQ said in an Aug. 2 research report that it has a “cautious” near-term outlook for the broadcasting, cable, and satellite universe.

“Our expectations reflect a continued healthy advertising rebound ... [but with] increased audience fragmentation, potentially disruptive business models, lingering concerns with ‘cord cutting’ and ‘some regulatory overhang,” the research firm said.

The S&P 500 is up 18.4 percent this year (including 11 percent in the past three months), while nine of the 10 stocks summarized below have more than doubled that.

Here are 10 multimedia-industry stocks with top returns and continued healthy prospects arranged in inverse order of their year-to-date gains:

10. Time Warner

Company profile: Time Warner, with a market value of $43 billion, is one of the world’s leading media and entertainment brand owners with the Warner Bros. film/TV studio, Turner cable networks (TNT, TBS, CNN), HBO/Cinemax premium channels, as well as several magazine brands through its Time Inc. publishing businesses.

Investor takeaway: Its shares are up 26 percent this year, including 27 percent in the past three months, and have a three-year, average annual return of 20 percent. They carry a 2.3 percent dividend yield. Analysts give its shares 13 “buy” ratings, 10 “buy/holds,” and 10 “holds," according to a survey of analysts by S&P.

9. CBS

Company profile: CBS, with a market value of $22 billion, is a media and entertainment company with diversified ownership interests in broadcast and cable TV networks and studio, TV and radio stations, outdoor properties, book publishing, and interactive businesses.

Investor takeaway: Its shares are up 38 percent this year, including 17 percent in the past three months, and they have a three-year, average annual return of 48 percent. The shares carry a 1.29 peercent dividend yield. Analysts give its shares 12 “buy” ratings, nine “buy/holds,” and nine “holds,” according to a survey of analysts by S&P. S&P has it rated “strong buy.”

8. News Corp.

Company profile: News Corp., with a market value of $20 billion, is a media conglomerate that owns controlling interests in some of the world’s biggest media and entertainment brands, including Fox (film/TV), The Wall Street Journal, SKY Italia, BSkyB and STAR TV, as well as other newspapers and publishing businesses.

Investor takeaway: Its shares are up 38 percent this year, including 25 percent in the past three months, and have a three-year, average annual return of 23 percent. Analysts give its shares three “buy” ratings, two “buy/holds,” and two “holds,” according to a survey of analysts by S&P.

7. Walt Disney

Company profile: Walt Disney, with a market value of $94 billion, is a media and entertainment conglomerate has diversified global operations in theme parks, filmed entertainment, television broadcasting, and merchandise licensing.

Investor takeaway: Its shares are up 40 percent this year, including 11 percent over the past three months, and have a three-year, average annual return of 24 percent. The shares carry a 1.15 percent dividend yield. Analysts give its shares nine “buy” ratings, 10 “buy/holds,” and 12 “holds,” according to a survey of analysts by S&P. S&P has a “strong buy” rating on its shares.

6. Discovery Communications

Company profile: Discovery Communications, with a market value of $14 billion, is a cable-networks company, with channels under the brands such as Discovery, Animal Planet, and TLC, and is a leading global provider of non-fiction entertainment through 115 networks in 180 countries.

Investor takeaway: Its shares are up 43 percent this year, including 17 percent in the past three months, and have a three-year, average annual return of 27 percent. Analysts give its shares four “buy” ratings, six “buy/holds,” 16 “holds,” one “weak hold,” and one “sell,” according to a survey of analysts by S&P. Analysts’ consensus estimate is for earnings of $2.79 per share this year, and growing by 20 percent to $3.36 a share next year.

5. Madison Square Garden

Company profile: Madison Square Garden, with a market value of $3 billion, is an integrated sports, entertainment, and media conglomerate that is expanding its distribution. It also operates several sports franchises, including the New York Knicks and the New York Rangers.

Investor takeaway: Its shares are up 45 percent this year, including 16 percent in the past three months and have a one-year return of 74 percent. Analysts give its shares three “buy” ratings, two “buy/holds,” and four “holds,” according to a survey of analysts by S&P.

4. Scripps Network Interactive

Company profile: Scripps Network Interactive, with a market value of $9 billion, owns two networks, the Food Network, and HGTV, which reach almost 100 million pay-TV subscribers, and it recently acquired a 65 percent controlling interest in Travel Channel, which reaches 95 million households. It also owns the Do It Yourself, Fine Living, and Great American cable networks, which reach about 57 million households.

Investor takeaway: Its shares are up 48 percent this year, including 11 percent in the past three months, and have a three-year, average annual return of 21 percent. Analysts give its shares five “buy,” ratings, five “buy/holds,” 14 “holds,” and one “weak hold,” according to a survey of analysts by S&P. Analysts’ consensus estimate is for earnings of $3.36 per share this rising and rising by 13 percent to $3.79 per share next year.

3. Time Warner Cable

Company profile: Time Warner Cable, with a market value of $28 billion, owns cable networks that pass through roughly 29 million homes, serving more than 12 million television subscribers, 10.5 million high-speed Internet access customers, and 5 million phone subscribers.

Investor takeaway: Its shares are up 48 percent this year, including 19 percent in the past three months, and have a three-year, average annual return of 33 percent. The shares have a 2.34 percent dividend yield. Analysts give its shares 13 “buy” ratings, nine “buy/holds,” eight “holds,” and one “weak hold,” according to a survey of analysts by S&P.

S&P analysts say there was “continued momentum evident in 2012’s first-half results” and in early August the company “affirmed its optimistic financial outlook, with the substantially integrated Insight acquisition likely to generate potentially significant economies of scale for the core residential business.” Analysts’ consensus estimate is for earnings of $5.70 per share this year and growth of 21 percent to $6.91 per share next year.

2. Comcast

Company profile: Comcast, with a market value of $91 billion, is the largest operator in the cable industry as its networks reach 53 million households, offering video, Internet access, and phone services. It also combined its cable networks with NBC Universal to create a new 51 percent-owned venture in 2011. (NBC Universal is parent to CNBC and CNBC.com.)

Investor takeaway: Its shares are up 48 percent this year, including 15 percent in the past three months, and have a three-year, average annual return of 29 percent. Its shares have a 1.89 percent dividend yield. Analysts give its shares two “buy” ratings, three “buy/holds,” and one “hold,” according to a survey of analysts by S&P.

Morningstar analysts say that “no other company can match Comcast’s ability to offer multiple services over one connection within the territories it serves. In addition to greater customer loyalty, delivering multiple services leads to higher cash flow per subscriber.”

1. Lions Gate Entertainment

Company profile: Lions Gate Entertainment, with a market value of $2 billion, is one of the world’s leading entertainment content providers, with ownership interests primarily in independent film and television studios, as well as cable networks, TV syndication and film/theatrical distribution.

Investor takeaway: Its shares are up 89 percent this year, including 11 percent in the past three months, and have a three-year, average annual return of 34 percent. Analysts give its shares four “buy” ratings, and seven “buy/holds,” according to a survey of analysts by S&P.

—By TheStreet.com’s Frank Byrt

Additional News: Comcast Earnings Rise on Internet Growth

Additional Views: Disney the ‘Blue Chip’ of Entertainment Sector: Pros

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