Why the media sector is far from dead

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Apr 03, 2006
At Morningstar, we spend a lot of time with great investors. Our favorites tend to buy and hold great companies at bargain prices.


We realize, however, that there are lots of ways to make money in the stock market, including buying stocks solely because they have fallen out of favor. The theory behind this approach is that stocks always revert to some mean valuation, and stocks that have sustained price and valuation declines will eventually enjoy gains that will move their valuation ratios up to the mean.


If this style of investing makes sense to you, then you might want to spend some time evaluating stocks in the media sector. Over the past five years, Morningstar’s index of media stocks has dropped more than any of our 12 sector indexes: negative 3.49 percent annually (including dividends), compared to a 4.33 percent total return for the S&P 500. Almost half of the 83 stocks in the index with five-year records had negative annual total returns during this period. Subtracting dividends, this percentage decline would be even worse.


As of March 20, the media sector was dead-last over the five-day, year-to-date, one-month, three-month, one-year, three-year, and five-year periods. Needless to say, the media sector has presented numerous humbling experiences to our team of analysts — and many highly respected investors — over the past several years.

http://www.journalstar.com/articles/2006/04/01/business/doc442da718d94c5615626276.txt