A wave of optimism swept the investment community following the Presidential elections, with media stocks significantly outperforming the major indices which hit record highs. Media stocks in general were up a strong 12,6% versus a 4,6% gain as measured by the S&P 500 following the elections on November 8th to near current levels.
The political elections have been a focus for investors over the past quarter, with the unconventional Presidential election in the spotlight. The open seat Presidential race and the battle over the control over the Senate and the House was a perfect set up for a very strong political advertising cycle It appears now that this will not happen.
We believe that the media stocks are in an oversold position, following a 1.5% selloff in the group over the past quarter. In our view, the fundamentals of the media companies appear favorable, although the second quarter is not expected to be as strong as the first quarter.
From April 16-21, media investors turned their attention to the National Association of Broadcasters’ (NAB) conference, in general, and the Media Finance & Investor conference presented by NOBLE, in particular.
There has always been a variance between Wall Street expectations and the somber reality and the dogged slow pace of drug development; in times of irrational exuberance, investment decisions may be made on meagre data; investors are now in a conservative mode, and rightly so; in these times, the words of William Edward Deming rings true, “in God we trust, all others bring data.”
A rebound in media stock valuations in the fourth quarter 2015 was not enough to offset the declines earlier in the year, with the exception of the television group.
In our last newsletter, we alerted investors that the media industry faced a tough second quarter, with weak national advertising.
We believe that the lackluster general economy and weak national television environment likely will position many media companies for a disappointing second quarter.
Media stocks seemed to be churning as investors determine the direction of the near-term fundamentals.