The Supreme Court has spoken, and its message is loud and clear: Congress shall make no law abridging the freedom of speech. Yes, that is the language directly from the First Amendment, and the Court’s recent 5-4 decision in Citizens United v. Federal Election Commission to extend that freedom of speech to corporations — particularly as it pertains to political speech — means two very important things.
First, it confirms the idea that groups of two or more persons should be free to spend their own money on political campaigns. Second, the decision could be a huge boom for advertising spending in the coming political season — and that just may mean big gains ahead for these media stocks.
Now, the realization of this new paradigm of corporate free spending on elections wasn’t lost on President Obama. In his first State of the Union speech, the president chastised the Supreme Court, saying, “Last week, the Supreme Court reversed a century of law to open the floodgates for special interests – including foreign corporations – to spend without limit in our elections.” Let’s leave aside the question of accuracy regarding the “foreign corporations” part of the president’s comments and focus on the fact that in all likelihood, the floodgates of special-interest money will indeed be opened.
By some estimates, those newly open floodgates could inject about $300 million more into the coming 2010 midterm Congressional election season. That extra $300 million is on top of the nearly $3 billion projected to have been spent in political advertising before the Supreme Court’s move. That’s a whole lot of advertising dollars, and the recipients of those big bucks promise to be media stocks.
And who are the likely beneficiaries of the Supreme Court’s virtual call option on media stocks? Certainly, television and radio giant CBS Corp. (CBS) stands to gain quite a bit here. The company is the largest owner of local television stations in the U.S., with a presence in about 40% of the country. In a year that promises to see vigorous Congressional seat battles, those local stations will probably see record advertising revenue.
Another likely winner is News Corporation (NWS), owners of the Fox News Channel, which also will likely see a lot of political ad spending. Other media stocks sure to benefit from the high court’s ruling are billboard owners Clear Channel Outdoor Holdings (CCO) and Lamar Advertising (LAMR) and major advertising agencies Interpublic Group (IPG) and Omnicom (OMC).
The bottom line here is that the Supreme Court’s ruling in Citizens United v. Federal Election Commission will translate into a big boost in advertising dollars spent, and that means a big bonanza for media stocks. So, if you’re looking for companies with a politically charged revenue stream, look no further than the aforementioned media plays.
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