Broadcasting stocks soared in Q3

If you bought a pile of radio and TV company stocks early this year, you’re now rolling in dough. Lots of pure play broadcast companies have posted triple-digit percentage gains this year, with most of that advance coming in Q3.

The conference call cycle begins later this month, but don’t expect the broadcasters to report big improvements on the revenue side. Rather, it’s likely that most will report that business is less awful than it had been earlier in the year.

So, why have the stocks taken off? Wall Street traders always try to anticipate industry trends before they occur. Business is just beginning to turn for media companies. The advertising recession isn’t over, but there are glimmers of hope. Stock buyers are betting that the real improvement will be seen a few months down the road, so the badly beaten-down media stocks have moved up dramatically in anticipation of that future growth.

The gains have been impressive. As of the end of Q3, TV group owner Nexstar was up 570.6% for 2009. So, if you’d invested $1,000 in Nexstar stock on the last trading day of 2008, that investment would now be worth $5,706. Not a bad return! Gray Television was the second-best performer of the stocks tracked daily by RBR-TVBR, up 480% through the first nine months of the year. Satellite radio company Sirius XM, which was teetering on the brink of bankruptcy early in the year, had gained 433.3% through Q3 after a successful financial restructuring.

In all, 10 of the radio stocks that we track have doubled in value or more (in some cases, much more) through the first three quarters of 2009. The same is true of nine TV stocks. Two companies, Saga and SBS, are in both lists, so a total of 17 radio and TV stocks have risen by 100% or more.

That also produced triple-digit gains for our indices. The RBR Radio Index was up 291.7% through Q3 to a level not seen since October 2007. The TVBR Television Index rose 350.2% to its highest level ever, since the index only dates to the beginning of 2008.

A few radio and TV stocks remain in negative territory for 2009. Most are in that situation because of concerns that they are significantly overleveraged and may be forced into a financial restructuring even if the advertising marketplace improves. Young Broadcasting is currently in Chapter 11 and its stock appears to be worthless, but it still trades once in a while at around a penny a share, down 66.7% for the year to date. 
-- Jack Messmer

Radio stock performance, 1st three quarters of 2009

Television stock performance, 1st three quarters of 2009

© 2009 Radio Business Report, Inc.

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