Media stocks are getting crushed, with the S&P 500 industry group falling 5 percent Thursday, and all 15 S&P 500 media stocks down this week. The immediate problem is weak earnings reports from the likes of Disney and Viacom, with both companies getting hurt by weak revenue at their key cable channels.
Viacom, whose stock is down more than 40 percent this year, reported that its U.S. ad revenue had fallen 9 percent year over year, "missing already low expectations," in the words of Atlantic Equities analyst Hamilton Faber.
"There are concerns that have always been out there, but there are a lot of investors who have been mindful of the risks and threats but not persuaded by the concerns," said Brian Weiser of Pivotal Research Group. But after recent results and corporate comments, particularly from Disney, "many of the sector's defenders are spooked, and from there it becomes circular."
Dedicated investors in media companies, like portfolio manager Larry Haverty of Gabelli Multimedia Trust, say those who sell now are making a big mistake.
"You've got to look at the whole playing field," Haverty said Thursday. Sellers are "missing the fact that the consumer is in extraordinarily good shape and probably getting better. Unemployment is down, and there's tremendous strength in the video game industry and the auto industry—and those guys are big advertisers."
"The ad market is not going to disappear in the second part of this year," he added.
Haverty holds a wide swatch of media companies in his fund and his personal porfolio. His favorite stock is Disney.
Weiser, who just upgraded CBS and Discovery to "buy," agrees that there are serious bargains to be found.
"This creates a buying opportunity for those who have confidence in the durability of the sector," said Weiser, who calls the current valuations and dividend yields for media stocks "amazing."
Still, he adds a caveat for the short-term minded.
"If the bulk of the market won't see things your way anytime soon, do you want to be left holding these? There's some of that thinking going on today, too," he said.
Comcast, the parent company of NBCUniversal and CNBC, is a member of the S&P 500 media industry group. Its stock is down about 7 percent this week.
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