Biz Q3: seeing red, opportunity

Media analysts, investors not ready to call a bottom yet

NEW YORK -- Shares of most media and entertainment conglomerates along with The Hollywood Reporter Showbiz 50 stock index set multiyear lows during the third quarter, which closed Tuesday, accelerating losses seen during the first half.

Still, media analysts and investors are not ready to call a bottom yet, though some said that patient investors should be able to pick up bargains at the depressed levels.

"Just about everything's a bargain with a long-term perspective, if there are any investors willing to take money out the mattress they have stuffed this year," Miller Tabak analyst David Joyce said.

Said Vogel Capital Management president Hal Vogel, "I wouldn't call anything a bargain, but for the first time in a while, some of the big entertainment/media stocks are coming into buying range for a potential medium-term bounce."

But given the continued economic sluggishness and wrangling in Washington over a bailout bill, media investors remain careful.

"It's hard to say whether anything has bottomed unless you know that about the market," said Dennis Leibowitz, managing general partner at media-focused hedge fund Act II Partners.

The Hollywood Reporter Showbiz 50 stock index closed the quarter Tuesday at 907.47, a day after setting an all-time low of 871.13. Year-to-date, that left the index down 31.1% from its 2007 close of 1,317.82. It lost 19% in the third quarter alone.

That means the Showbiz 50 stocks continue to underperform the broad-based S&P 500, which is down 20.7% year-to-date.

Analysts, however, said media stocks traditionally tend to rebound ahead of the overall market once there are signs that the economy is gaining steam -- which isn't the case at this point.

Among media and entertainment giants, Disney has held up better than its peers. The stock closed Tuesday at $30.69, down 1.6% for the third quarter and 4.9% year-to-date. And that still is well above its 52-week low of $26.30.

Most others ended the quarter near their lows for the past year.

For example, News Corp.'s Class B stock is down 43% this year. During the third quarter, it lost 21% to finish it at $12.15.

Time Warner fell 11% in the latest quarter and is down 21% year-to-date.

While most Showbiz 50 stocks are down this year, there also are some gainers compared with the first nine months of 2008 -- mostly in the pure-play content creation and cable fields.

Marvel Entertainment shares closed Tuesday at $34.14. That means a 6.2% improvement in the third quarter and a gain of 27.8% compared with the 2007 close of $26.71.

DreamWorks Animation's stock finished 2007 at $25.54 but ended Tuesday at $31.45 for a year-to-date gain of 23.1%.

Cable stocks also have held up better than other media subsectors for most of the year, even though they were pummeled Monday.

Cablevision Systems is up 2.4% year-to-date despite reduced deal expectations, closing Tuesday at $25.16, and Comcast Class A shares finished at $19.63, up 7.5% for the year.