Secular Changes in Media Expected to Create Investment Opportunities

In this episode of The Portfolio Fix, Marco Bravo describes why Fed policy and continued labor strength is behind the recent volatility in the Treasury market. Elizabeth Henderson explains the secular changes taking place to business models in the media sector, and how that affects content, advertising, revenue streams and ultimately company creditworthiness.  This episode was recorded on 10/23/23 and 11/10/23.

Credits discussed were chosen to depict AAM’s security selection process and are for illustrative purposes only. The securities discussed do not represent the entire universe of credits. There is no guarantee the investments discussed would be profitable, nor is it a recommendation to purchase a specific security, and should not be construed as investment advice.

 Warner Brothers Discovery (WBD) remains in transition, but we continue to like what management is doing and how it is positioned longer term.  This means debt repayment to reduce leverage while battling industry headwinds.  In our opinion, WBD intermediate spreads in the Treasuries +205 range are attractive relative to low-BBB peers in the Treasuries +190 range.

Fox (FOXA) and Paramount (PARA) are credits we are concerned are at risk of falling to high yield due to weakening credit fundamentals.  In our opinion, neither FOXA intermediate-dated bond spreads in the Treasuries +185-range nor PARA intermediate-dated bond spreads in the Treasuries +275 range adequately compensate investors for this downgrade risk.

Sources: The Federal Reserve, Bureau of Labor Statistics, U.S. Census Bureau and company reports

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