Media and entertainment sector-related exchange traded funds were in the spotlight Wednesday after AT&T (NYSE: T) won major legal battle in pursuit of acquiring Time Warner (NYSE: TWX).
The iShares Evolved U.S. Media and Entertainment ETF (NYSEArca: IEME) was among the best performing ETFs Wednesday, rising 2.6%.
Strengthening the media and entertainment ETF, Twenty-First Century Fox (NasadqGS: FOX) rallied as traders believed this media company could benefit the most from AT&T’s victory.
FOX shares jumped 7.3% and class A FOXA shares surged 7.1% Wednesday.
U.S. District Judge Richard Leon ruled Tuesday that AT&T could acquire Time Warner with no conditions, overruling a Justice Department antitrust challenge, CNBC reports.
Fox to Benefit from Greater M&A Interest
In response, Wall Street firm Jefferies reiterated its buy rating on 21st Century Fox shares as it expected Disney (NYSE: DIS) and Comcast (NasdaqGS: CMCSA) will fight to acquire the company in a “more lenient regulatory environment” for mergers and acquisitions.
DIS shares gained 3.1% and CMCSA was up 0.7% Wednesday.
“We see FOXA as a clear winner following today’s ruling, as it will likely set off a bidding war between CMCSA and DIS,” analyst John Janedis said in a note. “Given FOXA’s strategic importance, we expect both to stretch their B/S [balance sheets], but retain investment grade ratings, translating to a max bid of $42.50/$80B – ex Sky.”
“We believe Disney will respond to a CMCSA bid with a counter offer, as both companies view the FOXA/Sky assets as key to competing globally,” Janedis added.
IEME includes a hefty 5.4% tilt toward FOX, 5.3% in FOXA, 6.4% in DIS and 5.2% CMCSA.
IEME is an active sector ETF that includes artificial intelligence screens. The ETF is backed by machine learning to expand upon traditional sector classification systems. The fund take components from large-, mid- and small-cap segments and incorporate data analysis tools taken from artificial intelligence technology, including machine learning, natural language processing and clustering algorithms, among others.
Meanwhile, Invesco Dynamic Media ETF (NYSEArca: PBS), the largest media sector-related ETF, was 1.3% higher Wednesday. PBS includes FOXA 5.0% and DIS 4.9%.
PBS takes a smart beta approach to its indexing methodology. The underlying Intellidex Index is designed to provide capital appreciation by evaluating companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action, and value.
For more information on the media sector, visit our media category.