Big media stocks have been sluggish at best over the last few years. As Variety.com's Jill Goldsmith notes, "We're talking a five-year slump. Only Disney (DIS) has gained recently. News Corp. (NWS) stock is up a buck so far this year. But both are well below where they sat at the same time in 2001."
Goldsmith suggests looking for opportunities in some of the smaller media companies. On her list:
World Wrestling Entertainment (WWE): Market cap of $1.19B and current P/E of 22.61. Chris Marangi of Gabelli & Co. says "There's a lot of continued upside. They create content, sell it on DVD and VOD. They're strong in international."
NDS (NNDS): Conditional access systems for pay-television operators with $2.8 billion market cap and P/E of 32.2. Alan Gould of Natexis Bleichroder calls it "the arms dealer of the digital wars".
Rentrak (RENT): Collection processing for DVD and game rentals; market cap of $106.83 million and P/E of 31.53. Gould believes RENT "could evolve into a Nielsen-type business."
Gemstar-TV Guide International (GMST): The company has suffered major accounting and management scandals including the recent guilty verdict slapped on former CEO Henry Yuen for securities fraud. Goldsmith quotes an anonymous fund manager who says "I always thought it was worth more dead than alive. But now I'm seeing the alive scenario for the first time. In a year, this could be a real company."
Rick's Cabaret (RICK): According to Goldsmith, "Dennis McAlpine, one of the analysts who was onto Netflix when the $28 stock (which used to be $40) was at $3, is eyeing Rick's Cabaret, a chain of strip clubs in Houston."