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By Jason Stipp and Jeremy Glaser | 08-06-2015 04:00 PM

Friday Five: Time to Tune In to Media Stocks

Overblown concerns over cable cord-cutters could be opening up opportunities in the media sector. Plus, Ackman's sweet tooth for Mondelez, Priceline still attractive, and more.

Jason Stipp: I'm Jason Stipp for Morningstar and welcome to The Friday Five, Morningstar's take on five stories in the market this week.

Joining me with the Friday Five is Morningstar markets editor Jeremy Glaser.

Jeremy, thanks for being here.

Jeremy Glaser: You're welcome Jason.

Stipp: Up first, media stocks got hit this week. What were the concerns?

Glaser: A lot of media companies reported earnings this week, and a lot of investors are concerned about what's going to happen as people cut the cord from cable.

Disney was a prime example of this. They actually reported a quarter that looked pretty good and was above expectations. All the divisions increased revenue. Their adjusted operating income increased 8%. The quarter looked decent. But concern over what will happen to ESPN, which is the crown jewel of their television empire, as people move away from cable took center stage.

In the earnings call, Disney management was very clear that they think ESPN has a strong position, that people are going to want to watch sports live, and that the money they are investing to carry a lot of these popular sporting events for years into the future will pay off. [Management argued] even if people do cut the cord from traditional cable, they will want to get ESPN in some way. They really tried to defend that position, but it didn't stop the stock from sliding considerably.

Our Disney analyst, Neil Macker, thinks a lot of these fears are overblown and that ESPN is very valuable. He actually raised Disney's fair value after the quarter on the back of the potential strength of the new Star Wars movies, which will begin to come out in the next fiscal year, and the opening of the Shanghai Disneyland Resort. He sees those as potential catalysts for growth for the firm.

Disney is trading in 4-star territory right now, which is a good price for this wide-moat name. So it could be an interesting one to take a look at.

Some of the other media firms, 21st Century Fox and Discovery Communications, also are trading pretty substantially below their fair value estimates right now. These concerns over "cord cutters" aren't going away anytime soon, but they could be opening up some opportunities to own some very high-quality names.

Stipp: We also learned this week that activist investor Bill Ackman has a sweet tooth for Mondelez. What's the attraction?

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