Top 10 Media Stocks Loved by the Smart Money
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After identifying the most popular stocks among hedge funds (see our entire Top 10 here) according to their third quarter 13F filings, we have decided to break down the top ten stocks that hedge funds love in the media industry. Many of these media companies should see positive growth from a rebounding entertainment industry—driven by healthy TV ad and subscription growth. Our list includes the hundreds of hedge funds and prominent investors that are required by the SEC to disclose their public equity holdings quarterly. In descending order, we have outlined the most-loved media stocks based on the aggregate number of funds owning each.
Charter Communications had 33 filers owning the stock, putting it in tenth place. Charter has an incalculable trailing P/E and trades at over 100x forward earnings. We would be cautious with this cable and broadcasting company as it expects to only grow earnings at 1% annually over the next five years. Charter Communications is one of billionaire Julian Robertson's most loved mid-cap stocks (check out the Tiger's full 5 here).
Time Warner Cable (NYSE: TWC) found itself in ninth with 35 filers. Time Warner Cable trades at the low end of the industry at 14x earnings. With a 12.5% five-year expected earnings growth rate, Time Warner trades with a 1.0 PEG and pays a dividend yield of 2.3%. This portion of the Time Warner split provides video and high-speed data.
Time Warner Inc. had 37 filers owning the stock at the end of 3Q and came in eighth. This media company trades in line with its major peers at 18x, and is up almost 10% over the last month after beating 3Q EPS estimates by more than 80%. This Time Warner split segment is the media and broadcasting business, but is expected to grow at only 10% over the next five years compared to Time Warner Cable.
Liberty Interactive Corp tied for sixth with 40 filers owning the stock. This video and online commercial company trades at 18x trailing earnings, but only 15x forward earnings, and has a solid five-year expected earnings CAGR at 12%.
Viacom (NASDAQ: VIAB) was the other media stock tied for sixth, with 40 filers owning the company at the end of 3Q. This entertainment company trades at one of the cheapest valuations in the industry. With a 14x trailing P/E and only a 9x forward P/E we believe investors are getting a steal with Viacom shares. The media company also pays a 2% dividend yield.
Liberty Global saw a net increase of 8 filers - the largest increase of our ten stocks - and called 43 filers owners to be the fifth most popular media stock owned by hedge funds in 3Q. We remain cautious with Liberty Global given its incalculable trailing P/E and relatively high forward P/E of 25x. The video and Internet provider is also already up 50% year to date.
Comcast (NASDAQ: CMCSA) came in at fourth with 44 filers, following a net increase of 4 filers. Comcast is one of the giants on our list, with a near-$100 billion market cap. Investors can still find value in this media company which is expected to grow EPS at 15% annually while trading at only 17x earnings. Comcast was one of billionaire investor - and manager of Fisher Asset Management - Ken Fisher's newest stock picks in 3Q (check out all of Fisher's new picks).
The Walt Disney Company (NYSE: DIS) came in third with 47 filers, after a net increase of 6 filers owning the stock from 2Q. This international entertainment company is another giant in the industry with a $90 billion market cap. We see Disney offering significant value to investors at 16x trailing earnings, and it trades at an even more attractive 13x forward earnings. With the company’s recent purchase of the Star Wars franchise, Disney also has renewed opportunities for cross selling and sports the ability to establish a lasting relationship with the next generation of movie-lovers.
Liberty Media barely beat out Disney for second place with 48 filers. This media and entertainment company trades at the lowest P/E of our 10 media stocks at 8x. Liberty Media trades with a 2.0 beta, but is very close to taking a controlling stake of Sirius, which we believe is not being property accounted for in Liberty’s expected five-year growth.
News Corp (NASDAQ: NWS) was the top media stock by far with 60 filers, following a net decrease of 7 filers - the largest decrease of all 10 of our stocks. We believe that News Corp is a solid value play that is expected to unlock value for shareholders in the near future with a spinoff of its TV operations. This media giant currently trades at a 22x trailing P/E, but only a 13x forward P/E. With a solid expected long-term growth rate of 14%, News Corp’s PEG ratio comes in near 1.0. Billionaire Louis Bacon of Moore Capital Management targeted News Corp as one of his bullish bets last quarter.
This article is written by Marshall Hargrave and edited by Jake Mann. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services recommend Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!