Small caps and many mid caps have already corrected to far below fair value; once the mega caps enter a bear market, the next rally will be in sight, notes Kirk Spano; here, the editor of Fundamental Trends highlights several recommendations in the media sector.

When that time comes, you will need to get over your fear and become nearly fully invested rather quickly. Among large cap stocks Warner Brothers Discovery (WBD) is unbelievably cheap given the merger synergies.

It’s a must own media company and I think has 5x upside at least and probably 10x. As debt comes down, they’ll engage in buybacks and maybe dividends. They’re one hit series and the end of the bear market away from rallying. 

Among mid-cap growth stocks, Liberty Sirius (LSXMK) has huge patrons in Malone and Buffett. A low risk play with global expansion for a potential triple or better. If you want a less volatile way to play the streaming space, this is it. The stock doesn't offer huge upside, but there is very, very little downside.

Roku (ROKU) is suddenly on my radar again after first getting on it in 2018. Roku is profitable and not on the S&P 500 yet. It’s down 80% and based on conservative forward estimates has a very low P/E suddenly.

With the addition of Apple Music, I like that growth potential. And, while it would make sense for Apple (AAPL) to buy Roku, I don’t think the DOJ would allow it.

Meanwhile, our dividend recommendations are great core holdings, especially for retirees who want dividends as part of your total return. Underlying every dividend stock I recommend is underlying growth to support and increase the dividend long-term. I don’t focus on yield and neither should you. Focus on the strength of the dividend. 

Comcast (CMCSA) is in the buy zone, pays a good dividend, is beaten up with the streamers despite having the huge cable business and the more I think about it, seems the most plausible company to cut a merger deal with Netflix (NFLX).

With Peacock subscriptions only okay, a spinoff for shares in NFLX of Universal would create a content and distributions juggernaut similar to "must own" Warner Brothers Discovery. Adding some Netflix to the Universal theme park would also be pretty wicked. The stock is currently oversold on the weekly charts.

Paramount (PARA) also has be considered part of the media consolidation mix. I’m not sure what deal they’ll put together, but they are actively looking.

I don’t think they’ll be allowed to merge with NBCUniversal unless the NBC news division is sold to an Apple or Amazon (AMZN). Paramount could just consolidate some reality TV and specialty networks to round out its programming and make a million Star Trek series to bring in every nerd in the world. We’ll see. 

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