Life Isnt Always Fair… In Media

#AxelSpringer

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What's going on?

On Wednesday, a number of European media companies reported weak results, which hurt most of the sectors stocks. Even Axel Springer, the German publishing giant,saw its stock sell off despiteits numbers actually being in-line with investors expectations.

What does this mean?

Axel Springer (publisher of newspapers such as Bild and Die Welt) grew its revenue, which largely consisted of its digital businesses (67%). Thats not bad at all for a traditional media company (albeit one that has recently moved heavily into digital media) and should have been a reason for the Germans to pop bottles. But since Italian broadcaster Mediaset and French advertising company JCDecaux reported worse than expected results, investors started worrying about Europes media sector in general and all those stocks declined.

Why should I care?

For the stock: If you cant beat them, buy them. While competitors like Mediaset are under pressure from new media companies (in this case Netflix), Axel Springer has been on an online shopping spree. The German company has been aggressively investing in US startups focused on digital natives, such as financial news site Business Insider (which it ultimately bought) and mens lifestyle site Thrillist. And even though that strategy is apparently starting to pay off (at least judging by their numbers), the markets dont seem to agree (yet).

For you personally: If youre the only one whos done theirhomework, you might still get punished. Investors often dont just look at a single company but at sectors as a whole. And if the market loses confidence in a sector (i.e. it thinks that theres less money to be earned in traditional media), a company, which is doing quite well, can still get punished. It’s something to bear in mind if youre investing in individual stocks.

Originally posted as part of the Finimize daily email.

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