Solid year for media stocks
Majority of Showbiz 50 shows an increase in 2009Turns out, you could have sunk your money into a random list of media and entertainment stocks at the beginning of the year and made good money.
So broad were gains in those sectors that it's near impossible to discern a theme.
Penny stocks were great, with Sirius up 400% on the year, but so were expensive stocks, like Google, up 102%, or Apple, up 147%.
So new media seems to be a theme, until one notes that formerly lowly, old-fashioned TV and radio broadcasters are also way up. Belo and Entercom, for example, are up 280% and 475%, respectively, in 2009.
In fact, of the 50 stocks that make up The Hollywood Reporter Showbiz 50 index, only a few were down on the year, like Crown Media, Blockbuster and Cumulus Media.
Even music performed admirably, led by an 87% gain for Warner Music.
Among the major conglomerates CBS fared best, rising 77% on the year. It was followed by News Corp. (up 69%), Viacom (up 56%), Disney (up 44%), Time Warner (up 41%) and Sony (up 33%) Every one of them bested the 24% gain made by the S&P 500 this year.
One segment performing well in 2009 that some Wall Street analysts recommend for 2010 as well is movie exhibition. Carmike was up 107% in 2009, while Cinemark gained 108% and Imax was up 198%. Regal was a laggard, so to speak, up just 50%.
The biggest lesson learned in 2009, said Merriman Curhan Ford analyst Eric Wold, is that "consumers want 3D."
Wold is predicting that an increase in attendance of up to 2% in 2010, coupled with the potential of up to a 6% increase in average ticket prices -- driven by the 3D premium -- will lead to a U.S. boxoffice record in 2010, up as much as 8% over 2009.
He said that in 2009 about $1 billion, or 9% of the domestic boxoffice, came courtesy of 3D, and it could rise to as much as 20% in 2010 when there is a 150% increase in 3D screens in the U.S.
In-theater advertising rebounded in 2009, too, reflected by a 71% gain in shares of National CineMedia.
If one were forced to isolate an underperforming entertainment sub-sector, video games would be a candidate. Electronic Arts was up 10% in 2009, THQ was up 20%, Activision rose 29% and Take-Two Interactive Software was up 33%.
All would be adequate in a normal year, but in 2009 they fall short.
Those relatively small numbers, though, represent opportunity, said Wedbush Securities analyst Michael Pachter.
"Video Games will be the best performing sector this year," he predicted. "They've never traded at below market multiples before 2009, and did so all year."
Pachter's top picks are EA and Activision, though he thinks the entire group will perform well "once investors acknowledge double-digit industry growth."
Media stocks, though, remain tied to the general economy, and if it falters in 2010, "look out below," said Steve Birenberg of Northlake Capital Management. "I see the economy as generally cooperating but fragile."
Heading into 2010 he owns CBS, Central European Media Enterprises, DirecTV, Discovery and AT&T.
Other big-performing media/entertainment stocks in 2009 include Martha Stewart Living Ominimedia (up 90%) Dish Network (up 87%) and Netflix (up 84%).