If you are looking to invest in media stocks, there are two leading stocks you should consider buying: The Walt Disney Company (NYSE:DIS) and CBS Corporation (NYSE:CBS). I have generally been bullish on the two, but I see reasons to prefer one over the other. Let's take a look at the two below.

What The Walt Disney Company (NYSE:DIS) Is Doing to Create Value

Disney has been one of my favorite stocks for some time. Its management is committed to rolling out its leading brand image into emerging markets. At the same time, management is responsible with growth. This is evidenced by the recent decision to lay off some employees, because newly acquired technologies have cut back on needed labor. It is now trying to reduce its operational costs to cope with the many recent acquisitions.

At the same time, fundamentals are on the upswing. Their iconic film studio business, for example, saw a 12.3% increase in profits. So Disney is mostly acting on the analysis that says 2013’s improved profits will come mostly from cost management. It is now planning to cut even more jobs and shorten its expenses, mostly in its studio segment where the new plan is to make fewer movies but with better casts and producers. This strategy has already started to pay dividends in terms of the market reaction--over the last month, the stock has risen 9%.

The company is also excited about partnerships. Disney’s RunDisney sports brand has entered a partnership with New Balance to release RunDisney 860v3 running shoes for its marathons across the company’s parks. To attract more visitors to its parks, they created a wristband device called MagicBands, which will allow easy access to the parks and cinemas--even to hotel rooms--without the need to carry money. All the visitors need to do is subscribe to its online cloud service.

Then there is also the much publicized partnership with Netflix, Inc. (NASDAQ:NFLX) . Ever since the online streaming provider secured a deal with Disney that would provide the former with leading Disney titles starting 2016, Netflix's stock price soared from around $58 to $170. But, in substance, the real winner will be Disney, which will get upwards of $300 million in royalties per year from the deal. On a similar note, if you look at a private company, like YES Networks, which has an implied valuation of 15-19x EBITDA, Disney's ESPN valuation should be $66 billion. The disconnect between peer valuations sets an upside tone to a Disney investment.

Is it Time to Buy CBS Corporation (NYSE:CBS) ?

Recent actions by CBS have shed light on the company's vulnerability, including CBS’ lawsuit with Dish for its commercial-skipping DVR product. That's right… the technology Dish developed gives its users the right to jump-over ads from shows that are a day old. CBS is reportedly losing profit and revenues because of this and filled a lawsuit because it’s an “un-offered video-on-demand service.” It's interesting that this lawsuit happened just around the time that journalists started picking up on the "hey-maybe-Netflix's-business-model-will-become-obsolete" theme.

For some time, the Netflix bears have argued that Netflix will become obsolete due to rampant competition from lower-cost competition, like Hulu and possibly Apple Inc. (NASDAQ:AAPL). But what about the CBSs of the world? Haven't they passed their relevance? Content is increasingly moving towards more mobile means (ie. tablets, laptops, and smartphones), mediums that Netflix, not CBS, is primarily targeting. However, cable broadcasting isn't going away anytime soon. So, for me, CBS's value as an investment hinges on its multiples and growth potential.

Conclusion

CBS trades at a respective 18.2x and 14.5x past and forward earnings. In my view, that is high and, while justified by the double-digit growth rate, adds to the downside. The stock has more than double the volatility of the broader market and only a 1.1% dividend yield. By contrast, Disney carries much less volatility, has greater diversification (with a virtual monopoly in sports broadcasting) and trades at a respective 17.4x and 14.1x past and forward earnings. This discount is unwarranted--Disney is also forecasted for a double-digit growth rate, and this is more predictable in light of the firm's diversification and emerging market expansion. For this reason, I recommend buying Disney over CBS.

The article 2 Leading Media Stocks to Consider Buying originally appeared on Fool.com and is written by David Gould.

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