Media companies are floundering as investors fear recession and, more importantly, the unknown implications of the digital age. Are there buying opportunities amid the rubble?
Anthony DiClemente, Lehman Bros. media analyst, thinks there could be. But you have to be careful. The Big Media complex – Time Warner , News Corp., Disney , CBS , Viacom – is comprised of companies that each have their own problems in addition to the macro issues that plague the entire industry, he said.
Disney has theme parks. CBS has radio. News Corp. has newspapers. TimeWarner has AOL. Viacom trades at too high a multiple.
However, these names are all down so precipitously this year that one has to wonder whether all the bad news is now priced into the stocks. At some point, enough is enough, DiClemente said.
Take Disney, one of Jeff Macke’s favorites. The Mouse House is down 5% in 2008 (the least of the group) as investors worry about the company’s theme park business, which, DiClemente reminded, is less than a quarter of its bottom line. But take a bigger view: Disney is a global brand with best-of-breed assets. And that brand is only going to continue to strength as it gets exported to more countries around the world, he said.
Macke added that Disney doesn’t have exposure to the newspaper business, which he believes is the true plague of the media industry. Sure, theme parks could be in a downturn, but they aren’t going to disappear. But that could happen to print, he said.
DiClemente’s solution? Buy a basket of these companies with half a position instead of going all into one of them. That provides some amount of diversification within the sector without loading up on too much exposure to any one company’s failings.
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Trader disclosure: On Apr. 17, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Najarian Owns (AAPL), (BIIB), (CSCO), (ETFC), (NOK), (TSO), (XLF), (YHOO), (BSC) Calls, (CHK) Calls, (COP) Calls, (GOOG) Calls, (MSFT) Calls, (POT) Calls; Finerman’s Firm Is Short Pounds, (IYR), (IJR), (SPY), (IWM), (MDY), (COF), Owns (BJS), (MO), (MSFT), (NYX), (SUN), (TSO), (VLO), (YHOO); Finerman Owns (GS); Finerman’s Firm and Finerman Own (FLS); Macke Owns (MSFT), (DIS), (YHOO), (INTC)
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Lehman Bros. And/Or Affiliate Has Recvd. Compensation For Investment Banking Services From CBS, (DIS), News Corp. (TWX) And Viacom In The Past 12 Mos.
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CBS, (DIS), News Corp., (TWX) And Viacom Are Or During Past 12 Mos. Have Been Investment Banking Clients Of Lehman Bros. And/Or Affiliate
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