One down; Can broadcast stocks endure 11 more months?

As bad as 2007 was for most broadcasting stocks, the first month of 2008 did not bring any improvement. Most radio stocks were down for the month of January, as were most TV stocks. Expectations of a political ad spending windfall this year did not counter investors’ worries about the possibility, or perhaps probability, of a national recession.

Television stocks had a somewhat better month than their radio brethren, but still the numbers were nothing to celebrate. The TVBR Television Index, launched as the New Year began, fell 4% for its first month of existence. Its 11-year-old sister, the RBR Radio Index, dropped 14.8% for the month.

Of all the stocks tracked daily by RBR and TVBR, only one posted a double-digit percentage gain in January. That was Debut Broadcasting, a radio penny stock company that edged past the one buck a share mark for the first time. By contrast, there were 11 radio stocks and nine TV stocks that posted double-digit declines for the month.

Salem Communications demonstrated quite dramatically how falling into penny stock hell can drive a stock ever downward. Many retirement managers and mutual funds are not permitted to own stocks with a price of less than $5 per share, so tripping the barrier can lead to a sell-off. Trading volume picked up for Salem after falling below $5 for the first time in mid-January. By the time the month ended, the company’s stock had lost 42.8% of the value that it had on New Year’s Eve.

If Clear Channel looked cheap as the year began – after all, it still has a buyout pending at $39.20 per share – the stock fell another 11.1% in January. Much of that decline came after RBR/TVBR’s publication January 28th of a cost-cutting memo by Clear Channel Radio CEO John Hogan. That initially made Wall Street traders even more concerned that the buyout by Thomas H. Lee Partners and Bain Capital might collapse, but they later began to look it as a plus, due to reports that the two private equity firms were involved in drafting the memo.

It’s worth noting that Google is among the double-digit losers on our lists for the month of January. Its broadcast-related advertising business is just a small part of the company, but it is, just like radio and TV stations, an advertiser-supported business – and there is not much optimism about ad spending this year at this point.