Tuesday’s after-hours session provided some noteworthy theatrics for the PowerShares Dynamic Media Portfolio (PBS) that could prove impactful for the ETF today.
For starters, Rupert Murdoch’s 21st Century Fox (FOXA) pulled its $75 billion takeover offer for Time Warner (TWX). The news sent shares of Fox surging while Time Warner, the largest holding in PBS, traded lower by as much as 11.5%.
“Time Warner management and its Board refused to engage with us to explore an offer which was highly compelling. Additionally, the reaction in our share price since our proposal was made undervalues our stock and makes the transaction unattractive to Fox shareholders. These factors, coupled with our commitment to be both disciplined in our approach to the combination and focused on delivering value for the Fox shareholders, has led us to withdraw our offer,” Murdoch in a statement.
Time Warner has a 6% weight in PBS. In addition to the 21 st Century Fox/Time Warner news, Dow component Walt Disney (DIS) reported fiscal third-quarter adjusted earnings per share of $1.28 on revenue of $12.47 billion. Analysts expected EPS of $1.16 per share on revenue of $12.16 billion.
California-based Disney is the fifth-largest holding in PBS with a weight of 4.9%. Good news for PBS: With the recent weakness in the Dow, just eight of the index’s 30 constituents are still up at least 10% this year. Disney is one of those stocks.
PBS is down 2% over the past month, but that is better than the 3% shed by the S&P 500. The media ETF has also outperformed broader discretionary ETFs. For example, the Vanguard Consumer Discretionary ETF (VCR) is off 3.7% in the past month. [Media ETF Rallies]
A less considered catalyst that could still prove to be efficacious for PBS is short-covering. Recent data show CBS (CBS), Gannett (GCI) and Cablevision (CVC) are among the most heavily shorted stocks by hedge funds. Those names combine for about 10.6% of PBS’ weight, according to PowerShares data.
PowerShares Dynamic Media Portfolio
- Professional Services
- Time Warner
- Rupert Murdoch
- 21st Century Fox