The beat goes on.
Shakespeare wrote that music is the food of love — and music stocks have the unique ability to feed the hungry investor. Yet so much has changed and not just since the Bard’s day. Just a few decades back, music meant record albums, conventional radio stations and the Sony Walkman. And while vinyl’s making a comeback, much of the music listening these days happens on mobile devices (not that the Walkman, in its lovable box way, wasn’t mobile). Digital streaming portals such as Spotify now dominate, and the major record labels of old have disappeared or merged. But savvy investors still get to call the tune when it comes to these eight music-related stocks.
Sirius XM Holdings (Nasdaq: SIRI)
A Sirius investment indeed: While well below its hyped high of $60 per share, its $5.60 price is up more than a third these last 12 months. Warren Buffett’s a fan, too. “Sirius XM is in about 75 percent of new vehicles,” says Bob Johnson, president and CEO of the American College of Financial Services in the Philadelphia area. Given the free trial, “it’s much more difficult to cancel a service you’re receiving than not initiate one you’ve never experienced.”
Amazon.com (AMZN)
A Prime subscription means mucho music, as the e-commerce hit maker throws in its music streaming service as a perk. It’s no showstopper, but Amazon’s presence in video streaming and entertainment will continue to play a big role in its portfolio. Trading at $952, Amazon is kind of like an overhyped diva. “Its current price-to-earnings ratio of 241.8 is significantly higher than the industry average of 55.9,” says Brent M. Wilsey, who owns and operates San Diego-based Wilsey Asset Management.
Vivendi
Trading in Europe under VIV, the Paris-based Vivendi exemplifies how music business consolidation doesn’t equal shareholder satisfaction. Remarkably, its Universal Music Group has merged and acquired so many times it now features Taylor Swift, Lil Wayne and The Beatles catalog in its roster. Yet the stock is no higher today, at about $22, than in November 2003. Among its other properties, Vivendi also owns the French cable TV Canal+ and Dailymotion, a video-sharing website whose contributors include Vogue.
Apple (AAPL)
While Apple brought iTunes and the ubiquitous iPod to the world, it faces a musical moment of truth as paid music downloads give way to free streaming services. That explains why AAPL is getting into streaming itself — though it doesn’t explain a stingy dividend of just 1.6 percent. Even though the company is worth an astronomical $815 billion, “AAPL only uses 26.5 percent of its earnings to pay out that dividend,” says Wilsey, who rates it a “hold.”
Cirrus Logic (CRUS)
Even if you don’t know this Austin, Texas-based company, you probably use its audio processors and converters in pro audio and consumer products, including smartphones and tablets. After skidding 60 percent in eight months, CRUS has more than tripled since mid-2013 to $55. “They have good partnerships with Apple and others in the space and are able to earn premium returns that have persisted — and are likely to continue to persist,” says Doug Haddad, director, Valens Research in Cambridge, Massachusetts.
Pandora Media (P)
Though it pioneered the concept of music streaming based on learning your musical tastes, Pandora is one box you might not want to open investment-wise. “It’s struggled to make a profit as the current profit margin is minus 38.9 percent,” says Wilsey, who rates P a “sell.” “With no earnings, the price-to-earnings ratio is not material.” One bright spot: Sales jumped 11.6 percent over the last 12 months. “But earnings per share have fallen 80.7 percent during the same time frame.”
Time Warner (TWX)
Once part of the disastrous AOL-Time Warner merger, TMX has rallied more than 140 percent since 2012 and trades for $101 per share. But its days as a separate entertainment company may be numbered, as AT&T (T) intends to acquire it for $108.7 billion, a deal shareholders have approved but regulators haven’t. The company’s holdings include Warner Bros. Pictures — but oddly, not Warner Bros. Records, which is now privately held. TWX does own WaterTower Music, though, which concentrates on film soundtracks.
Sony Corp. (SNE)
The tech and music giant has suffered some notable defeats over its history — from failing to marry its consumer electronics and music licensing to losing the Betamax-VHS wars of the videotape era. Yet five years have fattened investors’ pockets by more than 200 percent. Sony now trades at $38 per share and observers consider it a growth company with a bright future. SNE ranks in the top 10 of information technology companies by revenue. It’s also benefiting from a recovering Japanese economy.
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Take Note of These 8 Music Stocks originally appeared on usnews.com
