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Many traditional media companies have been hard hit over the past few years as numerous consumers look to obtain entertainment from alternate sources instead of legacy media conglomerates. This trend has greatly impacted many firms in the space and has led to continued losses in the period following the low point in the Great Recession. However, recent performance suggests that things might finally be looking up for the media sector and that brighter days could be ahead.

Many firms have in fact adapted to the new age of entertainment, finding a way to stay relevant despite more choices than ever before. In order to do this, some have become leaner while others look to expand businesses into related niches in order to play the new market trends that capitalize off of traditional strengths. Meanwhile, many investors are moving into cyclical stocks in droves, helping firms in the consumer discretionary sector more than most as the economy slowly recovers.  This is especially true as entertainment spending tends to be one of the first things that people cut in a downturn but also one of the first to bring back in periods of recovery, suggesting that now may be the time to consider taking a look at the space (read Three Low Beta Sector ETFs).

Beyond these trends, investors should also note that many of the segments in this sector receive high Zacks Industry Ranks, meaning that they could be poised to outperform their peers in the short-term. As of Monday, Media Conglomerates were rated among the top 10% of all Zacks Industries, while Cable TV is currently just outside the top 10% and the Internet Content Industry occupies a space in top third (see all the Zacks Industry Ranks here). Given these favorable Zacks Ranks for many of the components in the Media sector, some investors may believe that these trends could continue. For these potential buyers, there is one ETF that tracks the space, the PowerShares Dynamic Media Portfolio (PBS - ETF report) which could be an interesting choice for those who are bullish on the broad media sector (see Three Tech ETFs Outperforming XLK).

Media ETF In Focus

PBS tracks the Dynamic Media Intellidex Index which looks to evaluate firms in the media industry based on a variety of data points. The index looks to do this by evaluating companies on the following metrics; fundamental growth, stock valuation, investment timeliness, and risk factors. This approach produces a fund that has far less in total holdings while also costing investors more than many other U.S. sector-based funds as PBS charges 0.63% a year in fees (read Which Auto ETF Should You Take For A Ride?).

Currently, the fund has broad exposure across market cap levels and styles as large caps make up about 43% of the fund, mid caps another 27% and small caps the remainder. From an individual security perspective, the fund is pretty spread out; no one stock makes up more than 5.5% of the total assets. Nevertheless, top holdings include Time Warner Cable (TWC - Analyst Report), Comcast Corp (CMCSA - Analyst Report), and CBS Corp (CBS - Analyst Report) giving the product a definite tilt towards content providers.

Given the promising trends for cyclical stocks at this time, some investors may want to consider piling into this media ETF in the short term. Just remember that the Zacks Rank can change very quickly and that there are still some significant long-term head winds facing the space in the digital age. Nevertheless, should the economy continue to rebound, we could see further gains in the media space making now a potentially good time to get into this surging sector (read Five ETFs to Buy In 2012).

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