We recently published a list of 10 Worst Broadcasting Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Sinclair Inc. (NASDAQ:SBGI) stands against the other broadcasting stocks.
Election Volatility in the Stock Market
September is a relatively volatile month for the stock market every year, under the pretense of one reason or another. However, with rate cuts around the corner, 2024 might be different.
Mona Mahajan, a senior investment strategist at Edward Jones, recently joined CNBC to discuss the importance of long-term investors leaning into market weakness. She believes that market volatility, such as that of this September, is an opportunity for investors to diversify their portfolios.
In August, the S&P 500 was up 18%, which, according to Mahajan, suggested an unsustainable rise that would most likely be met by a pullback or correction. Last week, the market experienced a 4.2% decline following this.
A series of weaker-than-expected economic reports on employment contributed to the market decline. These reports included job openings, ADP employment data, and non-farm payrolls. The most significant report, non-farm payrolls, was lower than anticipated. Additionally, downward revisions to previous economic data further spooked the market.
To balance this, the unemployment rate was brought down to 4.2%-4.3%, and 144,000 jobs were added. While this isn’t a big number, it shows that the economy is still improving. In a recession, job growth would be negative. Therefore, the current situation, while not ideal, is not indicative of a recession. In fact, the number of people filing for unemployment claims decreased on a week-to-week basis.
She advocates for long-term investors to take advantage of market downturns, as market volatility provides ideal entry points for investing in undervalued assets.
Mahajan also addressed the broader economic landscape, including the performance of large-cap technology stocks, which she noted may not be the haven they once were, as in 2023 or the first half of 2024. This suggests a need for investors to consider diversification beyond tech stocks. Still, she thinks that AI is a driving force in the market, suggesting that it will play a crucial role in various sectors over the next several years.
She says that historical patterns indicate that bull markets typically last longer than bear markets — the average S&P 500 bull market lasts about 5.6 years, which can encourage investors to maintain a long-term perspective rather than reacting impulsively to short-term market fluctuations.
In Mahajan’s view, for the S&P 500, a multiple of 17 seems reasonable. This valuation is generally on the higher end compared to historical levels over the past 15 years.
Interest rates are currently at a high point of 5.5% but are expected to decline over the next year or two. This potential rate-cutting cycle could positively impact stock valuations. While earnings growth for the current year has been revised downward to around 10%, it is still expected to be strong. Given these factors, it’s possible that the S&P 500’s multiple to exceed 17.
However, it’s important to note that election-driven volatility brings growth spurts for broadcasting media companies, with their revenues increasing because of the global advertising industry benefiting from political ad revenue due to election campaigns. We recently discussed this in another one of our articles, 10 Best Broadcasting Stocks to Buy. Here’s an excerpt from it:
“Forbes reported that the total spending reached $8.5 billion across TV, radio, and digital media in the last election cycle. This was 30% higher than the $6.7 billion projected earlier that year, and 108% more than spending in 2017-2018, which was a record at that time. GroupM projects a record-breaking $15.9 billion investment in political ad spending for the end of 2024.
As campaigns intensify their advertising efforts, especially in the weeks preceding the election, broadcast companies can anticipate a significant rise in revenue, given the heightened demand for airtime to reach voters.
According to Emarketer, 45% of the total digital political ad spending will be seen on CTV (connected TV). As major companies in the networking, entertainment, and streaming industry continue their ban on political content, the major benefit of this spending will go to broadcasting companies.”
Methodology
To compile our list, we sifted through ETFs, stock screeners, and online rankings to compile a list of 15 broadcasting stocks. We then selected 10 stocks that were shorted but at the same time popular among elite hedge funds and that analysts were bullish on. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers. The stocks are ranked in ascending order of their short interest, as of August 15.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of broadcast segment of the media company at work.
Sinclair Inc. (NASDAQ:SBGI)
Short % of Shares Outstanding As of August 15: 4.97%
Number of Hedge Fund Holders: 10
Sinclair Inc. (NASDAQ:SBGI) is a diversified media company and a leading television broadcasting company that provides local news and entertainment. It has 183 operating stations covering 38% of US television households. Over 50% of their news operations rank number one or two.
Q2 2024 revenue was up 8% year-over-year. By August, the company had $146 million in political advertising booked for the second half of 2024, almost double the amount in 2020.
It is expanding its podcast division with new sports shows, aiming to provide exclusive access to the stories of athletes and games. Management reported that 97 of the 100 most-watched telecasts in 2023 were on broadcast TV, and 96 were sports content. The company’s focus on sports content is also justified when we see that the Paris Summer Olympics ratings on NBC are up 80% compared to the 2021 games.
Just recently on September 5, the company also announced the return of Full Measure with Sharyl Attkisson for its 10th season. The 30-minute-long investigative news program airs on Sunday mornings on company television stations and live online. This season will focus on immigration and its impact on the presidential race and European politics, premiering on September 8.
It also partnered with Feeding America to help provide 1.2 million meals to children and families, with $25,000 in donations to the campaign.
Sinclair Inc. (NASDAQ:SBGI) is making a positive impact through its community initiatives and award-winning journalism. Its commitment to social responsibility and excellence makes it a promising investment. The company is held by 10 hedge funds, as of the second quarter of this year. Sinclair Inc.’s (NASDAQ:SBGI) shares are shorted by 4.97%.
Overall SBGI ranks 5th on our list of the worst broadcast stocks to buy. While we acknowledge the potential of SBGI as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SBGI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
