The PowerShares Dynamic Media Portfolio (NYSEArca: PBS) has lagged broader consumer discretionary exchange traded funds this year with a loss of 1.5% as traditional media stocks have been hampered by cord-cutting, or the move away from standard media outlets to newer concepts offered by the likes of Amazon (NasdaqGS: AMZN) and Netflix (NasdaqGS: NFLX).
Some industry analysts see additional near-term downside ahead for big-name media firms, such as Dow component Walt Disney (NYSE: DIS), CBS (NYSE: CBS) and Twenty-First Century Fox (NasdaqGS: FOXA).
Investors are also losing confidence in the industry as media companies revealed shrinking U.S. ad sales and profits that were supported by share repurchases. [Cord-Cutting Hampers Media ETF]
“Media stocks are headed for their first annual decline since 2008 as investors get increasingly wary of the growing number of Americans who drop traditional pay-TV packages, threatening the business model of an entire industry — from cable providers to program producers,” reports Gerry Smith for Bloomberg.
PBS follows the Dynamic Media Intellidex Index, which evaluates companies “based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value,” according to PowerShares.
That means that although PBS is not an actively managed ETF, when the fund is rebalanced, it can weed out some media laggards. Although the ETF has plenty of old media exposure through the likes of CBS and Walt Disney, PBS also features new media exposure through stakes in Google parent Alphabet (NasdaqGS: GOOG) and Facebook (NasdaqGS: FB). Those two stocks combine for over 10% of PBS’s weight.
“As for the media industry, Nomura analyst Anthony DiClemente said he expects “modest””subscriber losses and a stabilization of the TV advertising market next year. Media companies will promote the availability of their shows via on-demand services from pay-TV companies, which could hurt sales to Netflix but entice more consumers to keep their cable subscriptions, he said,” according to Bloomberg.
PBS investors are not the only ones being pinched by the recent retrenchment in media stocks. Hedge funds, among the biggest backers of media stocks in recent years, are feeling the pain of pullbacks in media stocks, such as those held by PBS.
PowerShares Dynamic Media Portfolio
