Wyatt Research Week in Review: Aug. 2-8

Cord-cutters cut into the share prices of media stocks this week, following disappointing earnings reports from pay-TV players that were dinged by consumers continuing to drop cable services in favor of offerings from Netflix (NASDAQ: NFLX) and other streaming-video providers.
Shares of Time Warner Inc. (NYSE: TWX), Twenty-First Century Fox (NASDAQ: FOX), Viacom (NYSE: VIA), CBS Corp. (NYSE: CBS) and Discovery Communications (NASDAQ: DISCA) were all taken to the woodshed Wednesday, but the major market mover was The Walt Disney Co. (NYSE: DIS).
Disney shares tanked 9.2% on Wednesday, the stock’s largest selloff in nearly four years. Prior to the mid-week massacre, Disney had been the best year-to-date performer among the Dow 30 stocks.
The thing is, Disney’s earnings report was actually quite good. It set a record for quarterly profit, with net income posting at $2.48 billion, up 11% year-over-year.
The bugaboo was ESPN, and specifically comments made by Disney CEO Robert Iger about The Worldwide Leader in Sports during the quarterly earnings call.
Iger noted that the company suffered “some subscriber losses” in its cable group, which led operating income guidance to be revised downward from a high single-digits compounded annual growth rate to mid-single digits.
Cord-cutting is likely to only increase in the coming years, yet at the same time there’s a certain type of sports fanatic who is unlikely to part ways with traditional pay-TV offerings anytime soon.
I’m a baseball junkie, so despite a deep personal loathing for Comcast (NASDAQ: CMCSA), I continue to shell out more than a hundred bucks every month for the ability to watch the MLB Network and ESPN’s Sunday Night Baseball broadcast.
Sure, I could easily just purchase the MLB package and stream live games through my Roku device, but the rub is that local teams are blacked out, so I’d be unable to watch Boston Red Sox games that air on the New England Sports Network.
And of course, let’s not forget that Disney is a multinational conglomerate with an iconic brand and a movie studio empire that includes Pixar, Marvel and Lucasfilm. As Wyatt Research analyst Lawrence Meyers pointed out in a Disney earnings recap, this week’s selloff could be an ideal time to add a position in what he considers to be a forever stock.
Here are some of my favorite Wyatt Investment Research articles from the week:
Top 5 Dividend Increases for August – Dividends matter, there’s no question about that. Over the last 10 years, the S&P 500 is up 71%. But when you include dividends along with the price appreciation, the S&P is up 111% on a total return basis. My colleague Marshall Hargrave scoured the dividend universe and unearthed five companies that are increasing their payouts in August.
GM Bets Big on India – General Motors (NYSE: GM) says it will invest $1 billion into the Indian auto market. Right now, GM is a small player in India, and not one with the best reputation for building quality cars. Despite the company sinking $1 billion into the country since 1996, it has been hounded by vehicle recalls. GM aims to double its market share in India by 2020, despite the fact that the Indian auto sector has experienced its worst slump ever over the past three years. Does GM’s move make sense?
A Hot IPO Still Worth Owning – This company, which recently completed its initial public offering, could be the next great opportunity in the premium food market. But not the premium food market you’d expect.
Does Jump in Rig Count Signal Key Milestone for Oil? – From October 2014 to June 2015, the number of active oil rigs declined 60%. But recently we saw the first increase in the rig count in 25 weeks. As tempting as it is to declare the end of the 25-week decline in the number of active rigs a victory for the oil and gas industry, there is still reason for concern if you’re expecting oil prices to start rising soon.
Yes, A Real 11% Dividend Yield in Energy – There’s no shortage of investors who have been lured in by the siren song of dividend yield only to subsequently be smashed against the rocks when the distribution is cut. But a legitimate and sustainable 11% yield can be found in a fuel refiner and manufacturer of specialty hydrocarbon products, which should actually be helped by the recent pullback in oil prices.
The Connected Car Continues to Captivate Investors – One thing is for certain: cars are becoming much more sophisticated specimens of mobile technology. The recent announcement that Nokia (NYSE: NOK) has sold its HERE mapping service to Audi, BMW and Mercedes for $3 billion is yet another signal that growth in the smart-car arena still has legs. One growth market that has generated a lot of investor interest lately – and one which Wyatt Research growth stock expert Tyler Laundon has covered extensively in his Top Stock Insights service – is self-driving cars.
GE’s Turnaround: Bringing Good Things Back to Life – Like General Electric (NYSE: GE) did in the 1980s under retired CEO Jack Welch, the company is once again finding a new path. Or, to be more accurate, it is finding its way back to the company’s old proven path as an industrial powerhouse. CEO Jeffrey Immelt is taking a twofold approach to GE’s turnaround. First, he has to find buyers for large portions of GE Capital’s loan portfolio. He then has to build up the company’s industrial business again – even more than before.
Is U.S. Steel Finally Ready to Reverse Course? – The drop for U.S. Steel (NYSE: X) has been dramatic. The stock has fallen over 25% year-to-date. It lost over a third of its value from the beginning of June to the low in July. U.S. Steel stock has rallied in the last week, but can it continue the upswing?
The Top 3 Undervalued Large-Cap Stocks – While many companies are legitimately struggling these days, others are being punished simply because of the current market climate, despite ringing up higher sales and profits. As a company’s profits grow while its stock price stands still it becomes increasingly undervalued, which creates a great opportunity for new investment. Get the names here of three undervalued large-cap stocks with very reliable payouts.
Have a great weekend!