by Traders Reserve | March 25, 2014 10:00 am
Insanity has indeed kicked in as the 68-team NCAA basketball tournament, commonly known as March Madness, gets underway across the country.
More than 140 million people—mostly men between the ages of 25-54—will watch the games on CBS (CBS) and Turner or a pay-to-view channel. Others will download the new app, or tweet to #MarchMadness.
Of course, not much chatter outside the arenas has to do with 3-pointers, zone defenses or the 30-second shot clock. Online you’re more likely to read about the $1 billion Buffett challenge, banned beer sales, Nike (NKE) logos, lost employee production and even vasectomies.
It’s likely that the winners and losers that emerge off the courts may be as much of a surprise to fans as those colleges that reach the Final Four on April 5 at AT&T Stadium in Arlington, Texas.
Here’s a preview of the big winners off the courts and the huge payouts that are involved.
Even $59 billion investment guru Warren Buffett couldn’t resist getting in on the action. Though you can no longer enter the Quicken Loans Billion Dollar Bracket contest sponsored by Yahoo Sports (YHOO), nearly 15 million people did.
Buffett came up with the idea to give $1 billion to anyone who could correctly pick the winners of all 63 games in the tournament. He made it free and super easy to enter. “To quote a commercial from one of my companies, I’d dare say it’s so easy to enter that even a caveman can do it,” Buffett joked, referencing GEICO insurance, a company that happens to be a huge success for his Berkshire Hathaway (BRK.A, BRK.B) with a $2.5 billion profit.
It may be easy to enter, but it’s really a longshot that anyone will win. In fact, odds of picking 63-of-63 games is just one in 4,294,967,296. The IRS folks are probably licking their chops at the income taxes that sum would generate. The winner would have the option to receive $1 billion payable over 40 years in annual installments of $25 million, or a one-time payment.
A non-married person would pay about $394,213,920 in federal income taxes if he or she opted for annual payments, or $197,955,348 for a lump sum.
Not likely the IRS or someone entering the Buffett contest will win, but many of the 50 million who play NCAA office pools each year and pick the most winning teams will win something. The biggest losers? Corporate America, which stands to lose $1.2 billion for every unproductive work hour during the first week of the tournament spent bracketing.
The Business of Beer
While the NCAA bans the sales of all alcohol during its championship games, it will allow broadcast partner CBS and March Madness partner Time Warner (TWC)-owned Turner to air 60 seconds worth of beer ads per hour, as long as they feature products with 6% alcohol by volume or less.
The ban could be a boon for yet another Buffett-owned stock, Coca Cola (KO)—a 1988 investment in the beverage company has earned Berkshire Hathaway $9.2 billion or a 766% gain since that time.
You might consider investing in Coca-Cola too, especially if you’re a basketball fan. The company recently announced that it would collaborate with LeBron James on a limited-edition Sprite 6 Mix that has a splash of cherry and orange flavor. But KO can give investors more than refreshing drinks. It also delivers a 19% higher return on equity than any other stock in its industry, and a 3.2% dividend which has risen for the past 50 years straight.
Although fans won’t be drinking beer at the games, odds are (and much better than winning Buffett’s billion) that they will at home, in restaurants, and in sports bars.
Molson Coors Brewing (TAP) may quench your thirst for profits. TAP has delivered positive earnings surprises in each of the last five quarters, with the last one coming in 14% above estimates. Formed in 2005 by the merger of Molson Canada and Coors in the U.S., the company has grown earnings at a rate of 4% over the past three year sales at 11%.
The company also has an annualized dividend growth rate of 10%, and as part of its fourth-quarter 2013 earnings release, raised its quarterly dividend 16% to 37 cents a share, giving it a 2.6% annual yield.
With Molson think: Coors Light, Molson Canadian, Carling, Staropramen and Blue Moon across the Americas, Europe and Asia; and popular Mexican brands like Corona, Negra Modelo and Pacifico brands.
Tuning in March Madness at All Costs
Finally, even more important than betting or winning or drinking is watching. CBS and Time Warner have a 14-year, $11 billion contract with the NCAA for the rights to broadcast all of the live games. It seems to be paying huge dividends in ad revenue for the two companies.
According to a new report from Kantar Media, last year March Madness produced over $1 billion in ad revenue plus $60 million in digital ads sold by CBS and Time Warner-owned Turner. That’s more than the playoffs and championship series for the National Football League, National Basketball Association, Major League Baseball and National Hockey League.
This will mark the fourth year of the 14-year collaboration for the two companies, and a 64% increase in ad sales from 2010.
By the way, as you’re watching see if you can keep track of how many Nike swooshes you see on the players. Forty-three of the teams in the tournament are displaying the Nike logo on their uniforms and sneakers. That includes the No. 1 seeds: Florida, Virginia, Arizona and Wichita State
Finally, some people—or should we say men—will go to any length to ensure their spots in front of the big screen. According to a major clinic in Ohio, it performs 40 or 50 more vasectomies a month before and during the 20-day-long tournament. In fact, another clinic in Cape Cod gave away 41 coupons for pizza to vasectomy patients last February and March as part of a promotion.
“A lot of patients come in and say, ‘I have to have this during March Madness, you have to talk to my wife about it. Tell her what my limitations are and that I need to be on the couch,” explained Dr. Ed Sabanegh, chairman of the Department of Urology at the Cleveland Clinic.
Indeed, there will be many winners and losers over the next couple of weeks.
Written by Karen Riccio
Source URL: http://investorplace.com/2014/03/march-madness-twc-brk-a-brk-b-tap-ko-nke/
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