by InvestorPlace Staff | June 20, 2011 8:37 am
The race for the White House is shaping up to be a doozy as President Barack Obama defends his stewardship of the economy against Republicans who argue that his policies are taking the U.S. in the wrong direction.
This means that voters are going to be inundated with more campaign advertising than ever. While this may fray the already frazzled nerves of the American people, it is great news for media companies.
Elections have been a cash cow for media companies since the politicians began advertising, and next year will be no exception. More than $5 billion was spent on the 2008 election cycle that brought President Obama into the White House, according to the Center for Responsive Politics. Newsmax, a conservative political website, estimates the 2012 election may cost $8 billion. President Obama, who raised a record-setting $760 million to get elected, may seek $1 billion to win a second term, according to Newsmax. That forecast is probably conservative.
Last year, the U.S. Supreme Court ruled in the Citizens United case that decades-long rules that placed limits on how much outside interests could spend to influence elections were unconstitutional. The reverberations will be felt at the state level as well where 13 governorships are in play next year. Costs for those races are also expected to climb.
What do media companies have to do to tap into America’s growing wellspring of political bile? Not much, really. The customers – politicians, political parties and interest groups – will come flocking to them. The stocks of some of the leading media companies are cheap.
Time Warner Inc. (NYSE: TWX), News Corp (NYSE: NWS) and Comcast Corp. (NASDAQ: CMCSA) are all down this year. Walt Disney Co. (NYSE: DIS) has been hammered, declining more than 11%. Some may argue that the “good news” about political spending has been baked into the stock prices of these companies and others Gabelli & Co., one of the largest media investors, recently opined that Wall Street doesn’t appreciate the benefits that these companies will get from political spending. That’s not the case, however, with CBS Corp. (NYSE: CBS), Viacom Inc. (NYSE: VIA.B) and local station owners such as Sinclair Broadcasting Inc. (NASDAQ: SBGI), which have had huge run-ups this year.
Here is my bullish case for the following stocks:
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