Time To Change The Channel To This Media ETF?

Published on Monday, 06 February 2012 21:39 Written by Todd Shriber

New York, February 6^th (TradersHuddle.com) – Following the Super Bowl, the timing is appropriate to consider investing in media stocks and that means much more than just Dow component Walt Disney (NYSE: DIS) or CBS (NYSE: CBS). For the indecisive media investor, there’s an ETF that means you can forgo the stock-picking burden and that fund is the PowerShares Dynamic Media ETF (NYSE: PBS).

Indeed, there’s a strong fundamental case for PBS, which is up almost 9% year-to-date, but still trades more than 8% off its 52-week high. Sure, the Super Bowl has come and gone, but with an improving economy and plenty of marquee sporting events that will be televised yet to come (the NCAA Tournament, the Masters, the Olympics, the World Series, etc.), PBS constituents could be primed to see an influx of add dollars.

Oh yeah, isn’t 2012 an election year? The 2012 presidential election could be one of the most expensive in history, according to Reuters, and that should be a boon for PBS. Home to 30 stocks, more than 27% of the ETF’s weight is allocated to small-caps and that could help explain the bullish performance thus far in 2012. That said, it will likely be familiar names and large-caps that benefit from the influx of political ad spending this year.

Said differently, it’s a good thing that Time Warner Cable (NYSE: TWX), Comcast (NASDAQ: CMCSA), CBS and News Corp. (NASDAQ: NWSA) represent about 20% of PBS’ weight. Overall, the top-10 holdings of PBS account for approximately 45% of the fund’s weight. Oddly enough, PBS does not offer any exposure to Disney.

What PBS does offer exposure to is of course more important than what it does not feature. To that end, investors should there is a tech angle with this ETF through a 3.5% allocation to InfoSpace (NASDAQ: INSP) and there’s bit a of a social media angle as well with a 2.8% weight to LinkedIn (NYSE: LNKD).

Obviously, media companies are the epitome of "cyclical" and that usually means high beta as well. With a beta of 1.31, PBS doesn’t skimp on the volatility, but it appears as though we are at the right point in the business cycle to be embracing cyclical stocks and ETFs. According to Zacks, "entertainment spending tends to be one of the first things that people cut in a downturn but also one of the first to bring back in periods of recovery, suggesting that now may be the time to consider taking a look at the space."

Sounds like a recipe for success for PBS for the rest of 2012.

The vitals: PBS has over $123 million in assets under management and an expense ratio of 0.63%. The ETF debuted in June 2005 and is optionable and shortable.