“Media and Telecom: Where to Invest in 2010” is the title of a lengthy report from the team of analysts at Wells Fargo Securities. Yes, they did find one broadcaster to include, but the list is dominated by cable and telecom stocks.
The group of six analysts, including the two best known to broadcasters for their coverage of the sector – Marci Ryvicker in equities and Bishop Cheen in high yield bonds – surveyed more than 200 institutional investors to get their views on where to make money by investing in the coming year.
The survey found that investors generally viewed cable as the one sector in the media field that is not challenged secularly. More than a third said they expect cable MSOs to outperform the broad market indices over the next three years. About a quarter held the same view for satellite TV companies.
Asked which medium offers the best growth prospects, the majority of respondents (58%) chose – no surprise – Internet. Cable was second (36%). Pure play radio can claim third place, but that was a mere 3%. Studios and broadcast network were at 2% each and pure play TV companies at 0%.
After digesting all of the input, the analysts offered their own stock picks. First was AT&T, not so much for its wired telephone business, although it was hailed for cost cutting there, but for its subscriber gains in wireless.
Second on the list is CBS Corporation, with an “outperform” rating and $15-16 target range. “We see the potential for upside to Street estimates given a healthy scatter market (particularly CBS, for which current pricing is up by high single digits versus last year’s upfront) and additional cost cuts. Our 2010 EPS estimate is $0.84, versus the consensus of $0.77,” the report said.
Comcast is the top pick among cable companies, with the Wells Fargo analysts bullish on the rumored deal to have Comcast take a controlling stake in NBC Universal. Also making the list from the cable/satellite stocks are DirecTV, Dish Network and Time Warner Cable. Cable network group Discovery Communications was also named as a place to invest, as was ad agency giant Interpublic Group.