Values Look Attractive in This Unloved Sector

Markets often treat some sectors better than others. Tech often gets the attention, but even in that space, right now AI-related names are attracting the most attention.

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  • Other sectors are out of favor with investors, either because of lower perceived growth, or because the market is too interested in what’s hot right now. Either way, that sets up opportunities for investors to buy unloved sectors today. In time, those sectors can come back into favor.

    Right now, media companies are out of favor. The market spent a few years enamored with the idea of these companies building out their streaming services.

    Now that that’s happened and competition has heated up, investors are less attracted.

    However, that’s creating some beaten-down value plays in top intellectual properties.

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  • For instance, Warner Bros Discovery (WBD) beat on subscriber count in its most recent earnings. But a wider-than-expected loss led to a big drop in shares.

    WBD shares have been knocked down nearly 40 percent in the past year. And that’s taken the stock to just 0.5 times its book value. As media companies adjust to tougher competition, they should start to see big profits again.

    Action to take: Investors may like shares at current prices or on any drop lower, as a contrarian buy here. At present, WBD does not pay a dividend.

    For traders, shares look oversold and could trend higher here. The June 2024 $10 calls, last going for about $0.55, could see mid-to-high double-digit returns on a push higher for shares. Traders should look to take quick profits on a strong up day for the stock.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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