Media ETFs

Average returns in this Category	3 months return	6 months return	12 months return	YTD return

Media	14.37%	65.65%	-8.22%	42.24%

Ticker SPY	Name	3 months return	6 months return	12 months return	YTD return

PBS	Powershares Dynamic Media Portfolio ETF	14.37%	65.65%	-8.22%	42.24%


	About Media ETFs
Media/Communications ETFs Overview and forecast http://finance.yahoo.com/etf/browser/mkt?c=etf_sc This is a very diverse sector. There's only one actual listed "media" ETF on the NYSE at the moment, but if you were looking for a barometer of a sector, this would be where to look. Mainstream media is on the ropes, and the economy has been progressively eroding investor enthusiasm for a neurotic industry. Strictly speaking, "media" also comes under the heading of Communications, which is a very mixed bag, including things like news media, phone companies and actual telecommunications hardware. However- that's an even less appealing sector, to some investors. The huge changes caused by the internet and digital media have left many of the big corporations trying to catch up with the technology. Investors have been right to be wary over the last year, too. The returns across the media/communications sector ETFs have been more or less unanimously unimpressive. Adding some unwanted baggage to the sector's own problems, the media and telecommunications stocks also include large index-sensitive giants like Time Warner, big heavyweight corporate institutional investment stocks which react badly to economic shocks. That hasn't done much for the ETFs' performances across the sector. The telecommunications industry, too, has had a rocky path in recent years. It's fair to say that the last year (2008) was an abnormal year in terms of a high cashflow, high profile consumer industry, but the returns were unambiguously bad, down about 30% on average. Some slight recovery in the first quarter of 2009 has added some sugar for the day traders, but sluggish volumes and margins haven't turned these ETFs into flavor of the month, yet. Short term (2 months) In the immediate future, these ETFs do have some prospects of extending their recovery and looking more respectable as a trading class. That said, it's going to require something more than slow rises to encourage big capital investment. None of the companies in this large, diverse sector are performing in a way to encourage an influx of capital. The volume of trade is another factor. Depending on the ETF concerned, volumes of trade often don't indicate much trading. Some of these ETFs are in effect low capital, which gives them a restricted upside. The bigger ETFs are more likely to do well in the short term. Medium term (2 years) In the medium term, telecommunications and media have a sort of speculative charm to them. They can be good market performers. The ETFs do have some actual strength in this area, because these industries have a history of mergers, headline making equity deals, and in some cases they're market leaders. Two years could well see media and communications showing at the very least a lot more direction than recent times, and working their way clear of the effects of the downturn. It would be reasonable to assume that many of these ETFs, which are really quite well weighted with high value stocks, will respond to any improvements in the consumer markets, too. Long term (5 years) Five years is a long time in investment, but it's a much longer time in corporate equity in telecommunications and media companies. It is rare that such a long time passes in these sectors without major movements. As a sector, media and telecommunications rarely get dull, and the ETFs can be expected to benefit. The introduction of the new tiers of digital media and telecommunications will also force a global wave of upgrades. In cash terms, it means that the world will have to throw out its old hardware and software, and the sector will definitely see major core business improve, at least over that time frame. Qualifiers to projections The fact is that there are also often winners and losers, in investments in this sector. Media and telecommunications stocks are particularly prone to "trends". They can go up and stay up for years, or do the exact opposite. These corporations are judged specifically on successes, not so much stable routine business. They're flashy, high profile companies, and they are rewarded and penalized by the market more liberally and severely. The big skeleton in the closet for media and telecommunications is capital infrastructure. The sector still has a lot of obsolescent infrastructure and production capacity, simultaneous with a growing demand for modern infrastructure based new services and goods. Meaning the growing demand has to be met, and the costs have to be kept under control. That will be no minor balancing act. Meeting demand for new services will cost money to put in new infrastructure. The cash flow from the new technology will have to pay for it. That will put a strain on corporations where cashflow is down. Corporate credit, if it's back onstream, may not be the answer to everything for the media and telecommunications sector. Good sales and good financial basics are going to pick the winners. Media and communications corporations aren't "cookie cutter" companies, by definition. Nor are the sector ETFs. To properly gauge an ETF will require checking their holdings, and knowing how their portfolios are likely to behave with a few large corporate elephants affecting the weighting. Returns could be good, but investors are reminded that this is a sector where the expression "risk management" usually has nine digits attached to it.

Last Updated on: 2010-01-14 02:03:40

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