Things are looking up for media and entertainment stocks. After weathering a difficult 1990, the stocks, like the broader market, are on the rebound, benefiting from lower interest rates and proposed banking reform.
The Variety/Furman Selz Entertainment Composite has gained 10.9% since the beginning of the year, compared with the S&P 500 Index, which is up 8.8%
Following in the footsteps of the broader market, the Composite added 2.9% last week.
Of all media and entertainment sectors, cable tv stocks have posted one of the strongest turn-arounds. Down more than 31% in 1990, the Variety/Furman Selz Cable Operators Index is up 12.2% so far this year.
Constrained over the past year by banking restrictions that limited the amount of financing available to the industry, cable should benefit from lower interest rates as well as other proposed reforms that seek to improve the banking environment. The hope among cable operators is that, while the operating fundamentals of the industry remain intact, such changes would help revive what has been a comatose private market for systems sales.
That bodes well for cable stocks.
“The stock market is based on expectations, and the expectation now is that cable’s situation is improving,” says analyst Kenneth Berents, Alex Brown & Sons.
The specter of reregulation, which has haunted the stocks for almost two years, also appears diminished. “You’ll see a lot of proposals similar to those introduced last year, but it will be more difficult this time around to get a consensus like you had in the House and almost had in the Senate,” says Mark Riely, principal of consulting firm MacDonald, Grippo, Riely.
“The administration came out against a bill, so you’re not going to get the bipartisan support,” said Riely. “The momentum stalled a bit, not only because people are consumed by the war, but the fact that the Federal Communications Commission has taken away some of Congress’ thunder initiating its own review of price regulation in the cable industry.”