Will August's Top Sectors Continue Rally in September?

• By the tickerspy.com Staff
• On 10:36 am EDT, Tuesday September 1, 2009

Yesterday's session capped the market's best August performance in nine years, and with exposure to selected Indexes that were on the move, it wasn't hard to outperform.

The S&P 500 returned 3.4% in August, a historically weak month for the markets. After rallying by approximately 50% from March lows, many investors believed that the market was due for a pullback in August, but the bulls were clearly in charge, and top stock pickers were able to earn outsized gains.

Rebounding after punishment during the recession was a theme during the second-quarter rally. Investors who were bold enough to buy into troubled banks, insurance companies, and other distressed companies near the bottom are now enjoying some huge gains. In August, it was the broadcast companies' turn to take the spotlight, as two beaten down subsectors of the industry topped tickerspy's monthly performance rankings.

The components of the Radio Stocks Index and the Broadcast TV Stocks Index got killed when the bottom fell out of the economy, as companies slashed advertising budgets to help them stay afloat. Then a slew of early August earnings reports that in previous years would have been considered dismal were enough to carry the stocks higher.

Half of the Radio Stocks Index more than doubled in August, with Saga Communications (AMEX: SGA - News) leading the way. The company shot up by 151% last month after reporting a -23% decline in Q2 net income.

After trending downward for four straight months, Emmis Communications (NASDAQ: EMMS - News) spiked in early August as its peers reported earnings. The company gave back some of its initial 350% rally to finish the month ahead by 144%.

Other top performers included Cumulus Media (NASDAQ: CMLS - News), and Citadel Broadcasting (NASDAQ: CTDB - News), both more than doubling during the period.

Meanwhile Sirius XM (NASDAQ: SIRI - News), which is the sole operator in the satellite radio market, was up by 50% in August. Investors are hoping that the company will continue to rebound on the back of its new iPhone application.

The Broadcast Television Stocks Index was largely carried by a 285% rally by Texas-based Nexstar Broadcasting Group (NASDAQ: NXST - News). The company's mid-August earnings report showed a smaller revenue decline than the industry average, dropping -12% while many broadcasters lost -20%, according to Television Broadcast.

LIN TV (NYSE: TVL - News), Entravision Communication (NYSE: EVC - News), and Sinclair Broadcast Group (NASDAQ: SBGI - News) were other top performers in the broadcast TV sector. The former two gained over 80% in August, while Sinclair went on a 55% run.

These sectors still face some headwinds, as Google's (NADSAQ: GOOG) YouTube, Apple's (NYSE: AAPL - News) iPod, and TiVo's (NASDAQ: TIVO - News) DVR technologies are making it easier for viewers and listeners to avoid commercial interruptions. However most of the stocks in both of the aforementioned Indexes are still trading at substantial discounts to their 52-week lows.

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