An Investor’s Take on 10 Super Bowl Ads

If you caught the big game this past Sunday, you probably spent a significant chunk of time watching Super Bowl commercials, which are known for their huge budgets, celebrity cameos and screwball humor. Whether or not you were a fan of this year’s commercials, if they worked as planned, the featured brands are now a bit more ingrained in your memory — and in the minds of tens of millions of viewers.

It’s no surprise that many industry leaders were in the lineup. Clearly, these companies had enough money in the bank to shell out the average $3.5 million price tag for 30 seconds of air time. But does this make them a good investment? I must admit I’m curious about some of these big players, so today I’m going to take a few minutes to evaluate some of the biggest companies that showcased their brands at the 2012 Super Bowl.

General Motors and Toyota

Automakers overwhelmed the commercial lineup this year. That’s understandable since U.S. auto sales are on the rise again, and automakers are eager to capitalize on increased demand.

First up, General Motors’ (NYSE:GM) Chevrolet had a number of creative commercials, each demonstrating a Chevy’s ability to perform in outlandish situations such as skydiving, bungee jumping and even the apocalypse. Watch all three spots here.

But in reviewing GM stock, it’s obvious that the company’s fundamental health doesn’t “run deep.” Of the eight fundamental factors that I look at, General Motors has decent operating-margin growth, cash flow and return on equity. On the other hand, the company needs to improve both its sales growth and earnings growth, so overall, this is a financially mediocre company.

The real impetus for me is that buying pressure for GM is at rock-bottom. This stock has made some gains in the past quarter, but I’m not convinced that its financial troubles are over yet. In the past three months, analysts have more than halved their earnings estimates for the fourth quarter. So I consider this stock a “sell” — keep this one on the sidelines for now. Click here to view my stock analysis for GM.

Toyota (NYSE:TM) had an ad that grabbed viewers’ attention — I especially liked the prospect of a new and improved Department of Motor Vehicles.

However, while Toyota can claim they have a reinvented Camry, the company should spend some time working on its financials.Toyota earns D- and F- ratings for every single one of the fundamental variables I look at. And investors have caught on to its fundamental weakness — buying pressure for this stock remains quite low. Last summer, I rated the stock a “hold,” but the fall and winter has knocked the wind out of Toyota’s sales. So I also consider TM a “sell” — do not get behind the wheel of this stock.

Coke and Pepsi

In addition to car commercials, we also saw a number of veterans return to the commercial lineup, most notably big beverage makers.

Soda giant Coca-Cola (NYSE:KO) made another Super Bowl appearance with its classic Polar Bears. Although there were debates about whether the bears were as cute as in years past, the ads were pretty much what audiences have come to expect from the animated creatures.

The nice thing about Coca-Cola is that its fundamentals are also pretty animated. The company could stand to improve its earnings growth and momentum, but it enjoys decent sales growth, cash flow and return on equity. And thanks to its 2.8% dividend yield, investors have been loyal to this stock. So buying pressure has remained strong — the shares have had a solid A- or B- rating for over a year now. I consider KO a buy. My Portfolio Grader app includes the details on my recommendation.

Of course, wherever there is Coke, there is its main rival, PepsiCo (NYSE:PEP). This year, Pepsi went with a dramatically different marketing approach — an over-the-top spectacle that suited the commercial’s kingly star, Elton John. This commercial highlighted Pepsi’s appeal to a younger crowd.

A review of the numbers, however, show that Pepsi’s financials seem a bit flat. The company’s return on equity and earnings momentum are decent, but otherwise Pepsi has run-of-the-mill earnings and sales growth as well as abysmal operating-margin growth. The one notable thing about this stock is that it also has forgiving investors — buying pressure for the stock has improved in recent months. The shares are on the cusp of being a “hold,” but buying pressure is pushing it into “buy” territory. If you own this stock, I suggest you keep a close eye on its levels of buying pressure and watch out for a potential downgrade. Every week I update the data in the Portfolio Grader system, so be sure to check the PEP stock report card on a regular basis.

The Rest of the Field

If you’re curious about some of the other Super Bowl players, here are my grades for six more companies shelling out for a 30-second spot in the spotlight:

company ticker fundamental grade quantitative grade total grade super bowl commercial
Anheuser-Busch BUD B B B Watch it here
Skechers SKX F F F Watch it here
E Trade ETFC F C D Watch it here
General Electric GE C D D Watch it here
Best Buy BBY C F F Watch it here
Time Warner Cable TWV B B B Watch it here

So while I’m happy to give the teams behind these commercials credit for their creativity, you’d be wise to watch these spots for entertainment only. Any stock ideas are best left to our fundamental and quantitative screens.

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