Looking for an idea in the media sector? Disney's (DIS) stock has been doing well. News Corp. (NWS) is near a 52-week high. Time Warner (TWX) is on a roll, too.
And then there's the Viacom B (VIA.B) shares. They're not too far from a 52-week high, either. Then again, many stocks are near their best levels of the year. The collective momentum seen in the major media companies makes it difficult for an investor to settle on a single candidate. How should one decide?
There are clearly some on Wall Street who believe in the company's valuation. It's true: Viacom isn't such a bad value. But the stock has already made such a big move. And I do have some reservations. Viacom has produced several hits this year. Box Office Mojo indicates that the studio is currently in second place when it comes to market share. Will the trend continue? Hard to say, as the movie industry can never be predicted.
Also, keep in mind that the MTV Networks could use a further boost in terms of creative programming. And with the video game industry performing poorly, I'm not certain how Viacom's flagship brand in that arena, Rock Band, will add to the story.
I'd like to see Viacom pull back significantly before considering buying. Look for a margin of safety before committing capital in this name. Another thing to keep in mind: What works one year may not work the next. As we approach 2010, remember that there will be some stock winners from 2009 that will be left behind as the big players move on to other ideas.
Disclosure: I own Disney; positions can change without notice.
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