Recently, we released a compilation of the “10 Worst Broadcasting Stocks to Buy According to Short Sellers.” Within this piece, we delve into where Cumulus Media Inc. (NASDAQ:CMLS) positions itself against its broadcasting counterparts.
Addressing the topic of stock market volatility concerning elections, September typically serves as a tumultuous period annually. However, with impending rate adjustments on the horizon, the landscape in 2024 may offer divergence.
Mona Mahajan, a senior investment strategist at Edward Jones, shared insights on CNBC emphasizing the advantageous nature for long-term investors to capitalize on market fluctuations, using them as opportunities for portfolio diversification. Observing the S&P 500 surge by 18% in August raised concerns of an unsustainable incline, suggesting an imminent pullback or correction, which manifested with a 4.2% drop the subsequent week.
Contributing to this decline were lackluster employment reports, including disappointing data on job openings, ADP employment figures, and non-farm payrolls. Despite softer numbers, signs of a resilient economy persisted as unemployment rates lowered to 4.2%-4.3%, with the addition of 144,000 jobs. The encouragement stems from a positive job growth trajectory, displaying signs of economic progression rather than a recession.
Mahajan advocates for embracing market downturns, viewing market volatility as an entry point where undervalued assets seize visibility. While addressing the economic terrain, she highlights the evolving dynamics of large-cap tech stocks and underscores the necessity for diversifying beyond tech holdings. AI innovation emerges as a pivotal driver within multiple sectors for the foreseeable future.
Historical trends favor extended bull markets over bear markets, with the average S&P 500 bull run spanning approximately 5.6 years, instilling a long-term investment approach amidst fleeting market fluctuations.
Contemplating the future, Mahajan earmarks a reasonable multiple of 17 for the S&P 500, showcasing a slightly elevated valuation relative to past 15-year historical ranges. Current interest rates maintaining at 5.5% are poised for a downward trajectory, potentially bolstering stock valuations. Despite a slight revision downward to 10% in earnings growth for the year, resilience remains evident in expecting strong performance. These indicators prompt a consideration that the S&P 500 multiple could surpass the 17-mark.
Election-driven volatility notably sparks growth spurts for broadcasting media companies, magnifying revenues via the upsurge in global advertising income from political ad revenues during election campaigns. This trend was discussed extensively in another article showcasing the “10 Best Broadcasting Stocks to Buy,” encapsulating the flourishing market dynamics within the broadcasting realm.
In terms of methodology, our research encompassed filtering through ETFs, stock screening tools, and online rankings to curate a lineup of 15 broadcasting stocks. Through meticulous assessment, the final selection of the top 10 stocks amalgamated those with strong shorting activity but esteemed among top hedge funds and favored by analysts. Hedge fund analytics were sourced from Insider Monkey’s extensive database tracking over 900 elite fund managers, ultimately illuminating the ranking of stocks based on ascending short interest as of August 15.
The allure of monitoring hedge funds’ stock allocations stems from research indicating a potential to surpass market performance by deploying strategies mirroring premier hedge funds’ top stock picks. The strategy exemplified in our quarterly newsletter, selecting both small-cap and large-cap stocks, has yielded a remarkable 275% return since May 2014, outperforming benchmarks by a significant margin.
The spotlight then shifts to Cumulus Media Inc. (NASDAQ:CMLS), a predominant player in the audio-first broadcasting landscape and the second-largest proprietor of AM and FM radio stations in the US behind iHeartMedia. Operating with 401 stations dispersed across 85 media markets, including Westwood One, Cumulus Media remains a steadfast entity within the industry.
Westwood One, distinguished as the largest audio network in the US and the exclusive national radio partner of the NFL iterates its longstanding presence in delivering pristine audio coverage for the 2024 college football season. Despite a minor decline of 2.52% in revenue reaching $204.85 million in Q2 2024, the digital marketing services segment showcased a commendable growth of 24%, attributed to a surge in legacy radio clients engaging with DMS.
Evaluating the political revenue generation, the company reaped $1.9 million in Q2, signifying a progressive upswing from the parallel period in 2020. Even though Q3 revenue projections exhibit a downturn trend, management forecasts an imminent uptick in advertisers’ expenditure. This stems from the burgeoning political climate, positioning the company optimally for growth. As of June 30, five hedge funds retain bullish positions in the company, with the largest stake held by CastleKnight Management at $253,980.
Though CMLS secures the eighth spot on the list of unfavorable broadcasting stocks for investment, acknowledging its potential merits an investment, yet the preference leans towards AI stocks delivering substantial returns within a condensed timeframe. Seeking an AI stock that surpasses CMLS but trades below five times its earnings presents an intriguing opportunity documented in our report on the “cheapest AI stock.”
In summary, the detailed analysis underscores the intricate interplay of market forces and the potential for growth within the broadcasting sector amidst wavering market sentiments.