Time To Buy The Media ETF (PBS) - ETF News And Commentary
February 07 2012 - 4:17AM
Zacks
Many traditional media companies have been hard hit over the
past few years as numerous consumers look to obtain entertainment
from alternate sources instead of legacy media conglomerates. This
trend has greatly impacted many firms in the space and has led to
continued losses in the period following the low point in the Great
Recession. However, recent performance suggests that things might
finally be looking up for the media sector and that brighter days
could be ahead.
Many firms have in fact adapted to the new age of entertainment,
finding a way to stay relevant despite more choices than ever
before. In order to do this, some have become leaner while others
look to expand businesses into related niches in order to play the
new market trends that capitalize off of traditional strengths.
Meanwhile, many investors are moving into cyclical stocks in
droves, helping firms in the consumer discretionary sector more
than most as the economy slowly recovers. This is especially
true as entertainment spending tends to be one of the first things
that people cut in a downturn but also one of the first to bring
back in periods of recovery, suggesting that now may be the time to
consider taking a look at the space (read Three Low Beta Sector
ETFs).
Beyond these trends, investors should also note that many of the
segments in this sector receive high Zacks Industry Ranks, meaning
that they could be poised to outperform their peers in the
short-term. As of Monday, Media Conglomerates were rated among the
top 10% of all Zacks Industries, while Cable TV is currently just
outside the top 10% and the Internet Content Industry occupies a
space in top third (see all the Zacks Industry Ranks here). Given
these favorable Zacks Ranks for many of the components in the Media
sector, some investors may believe that these trends could
continue. For these potential buyers, there is one ETF that tracks
the space, the PowerShares Dynamic Media Portfolio (PBS) which
could be an interesting choice for those who are bullish on the
broad media sector (see Three Tech ETFs Outperforming XLK).
Media ETF In Focus
PBS tracks the Dynamic Media Intellidex Index which looks to
evaluate firms in the media industry based on a variety of data
points. The index looks to do this by evaluating companies on the
following metrics; fundamental growth, stock valuation, investment
timeliness, and risk factors. This approach produces a fund that
has far less in total holdings while also costing investors more
than many other U.S. sector-based funds as PBS charges 0.63% a year
in fees (read Which Auto ETF Should You Take For A Ride?).
Currently, the fund has broad exposure across market cap levels
and styles as large caps make up about 43% of the fund, mid caps
another 27% and small caps the remainder. From an individual
security perspective, the fund is pretty spread out; no one stock
makes up more than 5.5% of the total assets. Nevertheless, top
holdings include Time Warner Cable (TWC), Comcast Corp (CMCSA), and
CBS Corp (CBS) giving the product a definite tilt towards content
providers.
Given the promising trends for cyclical stocks at this time,
some investors may want to consider piling into this media ETF in
the short term. Just remember that the Zacks Rank can change very
quickly and that there are still some significant long-term head
winds facing the space in the digital age. Nevertheless, should the
economy continue to rebound, we could see further gains in the
media space making now a potentially good time to get into this
surging sector (read Five ETFs to Buy In 2012).
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