Stocks for Sports Fans
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Now that we’re passed the Super Bowl and on the cusp of March Madness, it might be a good time for you to consider the stock market. While sports and stocks might not seem like a match, avid sports fans have good reason to consider investing in these companies. Sports in the United States is big business, and the popularity of sports in America has led to big profits for some of the country’s biggest companies. If you’re an avid sports fan and an avid investor to boot, you’d be wise to consider these stocks the next time you watch your favorite team.
Three titans of sports broadcasting
Speaking of the Super Bowl, CBS Corp. (NYSE: CBS) saw solid full-year 2012 results, including 3% growth in total sales, on the strength of its Entertainment and Cable Networks divisions, which include the company’s flagship CBS Network and the premium subscription service CBS Sports Network.
Football is America’s most popular sport, and CBS dominates football broadcasting. CBS broadcasts weekly NFL regular season games, as well as AFC regular-season, post-season divisional playoff and championship games. CBS Sports has rights to broadcast the AFC through the 2013 season, including the broadcast of the 2013 Super Bowl. A positive development for CBS came in December 2011, when CBS wisely extended its rights with the NFL to broadcast the AFC from the 2014 season through the 2022 season, including certain National Football Conference regular season games and the Super Bowls in 2016, 2019, and 2022.
Disney (NYSE: DIS) is a media conglomerate, with a market capitalization of $90 billion and a wide array of sports networks, including ESPN and ABC. Disney reported solid group 2012 results, with sales increasing 3% year over year on the strength of its Media Network segment, which saw sales increase by only 4%.
Disney also got off to a strong start to the new year, reporting that fiscal first quarter revenue rose 5% versus the same quarter a year ago. Strength was particularly noticeable within the Media Networks segment, which contains the popular ABC and ESPN networks and saw 7% revenue growth year over year.
Time Warner (NYSE: TWX) is a $50 billion company that also benefits handsomely from America’s love affair with sports, and the company depends heavily on its television networks. The Network segment is the most important one for Time Warner's future.
Television networks represent more than two-thirds of Time Warner’s profits. Therefore, continued development of successful TV programming is critical for the company. Management is optimistic here, pointing to the newly arranged 14-year contract with CBS and the NCAA to broadcast the Division I Men’s Basketball Tournament, one of the most highly watched sporting events in the United States.
A more speculative play to consider
If you’re an investor interested in more highly volatile, speculative stocks, you might want to consider the Madison Square Garden Co. (NASDAQ: MSG). The company carries a market capitalization of only $4 billion and holds a valuation befitting a high-growth stock, with a trailing P/E of over 30 times.
Buying this stock provides exposure to both broadcasting and sports teams themselves. By investing in Madison Square Garden, you’re pinning your hopes largely on the New York Knicks, New York Rangers, and New York Liberty. MSG also operates the MSG Networks. In February, the company reported fiscal second-quarter revenue rose 4% year over year.
The Foolish takeaway
Disney, CBS, and Time Warner are stocks that are modestly priced, with trailing price-to-earnings ratios of less than 19 and dividend yields ranging from 1% to 2.25% annually. They offer an attractive combination of modest valuations, dividend income, and solid growth rates that should be attractive for value and income investors alike.
Purely growth-oriented investors may prefer MSG, since it has more room to run due to a much smaller market cap. Each of these companies profit handsomely from each of America’s beloved sports, including football, basketball, and hockey. Investors in these stocks should take comfort from the fact that America’s love affair with sports isn’t likely to end any time soon.
Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Madison Square Garden and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!