Media ETF Leading the Consumer Sector Higher - ETF News And Commentary
The media industry has been performing remarkably well and is leading the broad consumer space this year thanks to the new age of entertainment, technological evolution, digital applications, online advertising and changing consumer habits.
Traditional media firms are increasingly joining the Web, lured by the growing online customer base and lower advertising prices. Further, these companies are adopting new ways of generating revenues from other sources. The most popular is the online subscription for complete access to articles on phones, tablet computers and the Internet (read: Top Ranked Internet ETF in Focus: FDN ).
This solid trend in media is further supported by improving economic fundamentals and a string of upbeat data. The healing job market, recovering housing market, robust retail sales data, and increasing consumer spending continued to fuel optimism in the space.
Entertainment spending is also growing with gradual improvement in the economy, suggesting that this corner of the consumer space is gaining momentum heading into 2014.
Moreover, many of the segments, like Cable TV and Broadcast radio/TV, in this sector receive high Zacks Industry Ranks , suggesting that they are poised to outperform their peers in the coming months (read: 3 Top Ranked Consumer ETFs for the Holiday Season ).
Based on the favorable trends and growing advertising revenue streams, many bullish investors may want to make a broad play on the media sector. This can be easily done by the only pure play - PowerShares Dynamic Media Portfolio (PBS) - which tracks the Dynamic Media Intellidex Index.
The ETF has amassed $293.4 million in its asset base while trades in a solid volume of roughly 140,000 shares a day. The product charges 63 bps in fees and expenses from investors.
The fund gained over 50% in 2013, easily outpacing the other consumer funds and the broad market funds. This outperformance is likely to continue in 2014 given that PBS has a Zacks ETF Rank of 2 or 'Buy' with Medium risk outlook. Further, both technical and fundamental factors confirm the bullish trends as described below (see: all the Top Ranked ETFs ):
The fund recently made its new high of $25.30 and its short-term moving averages have managed to stay above long-term levels. The 9-Day SMA is now comfortably above the longer-term 200-Day SMA, suggesting continued bullishness for this ETF.
Meanwhile, the fund's RSI is just under 60, suggesting that the fund isn't too overbought, and that it still has some more room to run.
The fund seeks to offer capital appreciation by investing in the companies that are selected on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. This approach results in a small basket of 30 media stocks, which are somewhat concentrated in its top 10 firms with nearly 45% of assets (read: Beat the Market with Smart Beta ETFs ).
Robust performances by some of the top 10 traditional media firms like CBS ( CBS ) , Time Warner ( TWX ) , Walt Disney ( DIS ) , DirecTV ( DTV ) and Dish Network ( DISH ) have resulted in the strong rally of the media ETF. These firms make up for nearly 5% of PBS each. TWX, DIS and DTV surged around 50% this year while CBS and DISH added under 40%.
Additionally, the product has broad exposure across market cap levels as large caps make up about 45% of the portfolio, mid caps another 22% and small caps the remainder. A definite tilt toward the growth stocks is an added advantage for the surging media ETF (see: all the Consumer Discretionary ETFs here ).
This is because growth investing is a great momentum play in the prolonged uptrend in the stock market. And if the economy continues to rebound and favorable fundamentals are still present in the sector, we could see further gains in the media space, making it a great bet in 2014 as well.
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CBS CORP (CBS): Free Stock Analysis Report
DISNEY WALT (DIS): Free Stock Analysis Report
PWRSH-DYN MEDIA (PBS): ETF Research Reports
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