As long-term investors, we're taught to always be mindful of
the big picture.
We're constantly reminded not to get caught up in the
day-to-day fluctuations of the market, not to listen to the
talking heads on CNBC who will say anything to keep the 24/7 news
cycle churning, not to panic when one of our stocks get beaten
or bad press.
And we certainly aren't supposed to invest in something based
on one event.
Apple (Nasdaq: AAPL)
investors have learned that the hard way over the past 18 months.
In the past, Apple's top-secret product announcements unveiling
the latest iPhone or iPad automatically resulted in a 10% - 13%
spike in its share price in the weeks that followed.
That doesn't happen anymore. Wall Street finally grew bored
with the world's largest company simply churning out the latest
versions of its signature products. Now, Apple product
announcements barely move the needle for AAPL shares. Any future
appreciation in Apple's share price will come from sustained
earnings growth and new innovations, not much-hyped one-time
Similarly, it would be silly for someone to invest in a
company based on a sporting event. Or would it?
Sports have become big business in this country. The average
cost to run a 30-second ad during this month's Super Bowl was a
whopping $4 billion. Olympics ads are much cheaper. After all,
the Olympics last 17 days; the
is a one-day mega-event. However, those 17 days of Olympics add
up. Olympic ads will cost the companies that paid for them
approximately $1 billion this year.
And it's obvious where all those billions of Super Bowl and
Olympic dollars go: to the networks that air them. NBC is airing
its fourth consecutive Winter Olympics (it also airs the Summer
Olympics). Each of those four years, advertising revenue has
exceeded $750 billion. The company has turned a sizable profit in
three of those four years - breaking even in the 2010 Vancouver
When a network airs a sporting event that millions of people
are watching, investors routinely snatch up shares of the company
that owns the network.
Since Fox aired the Super Bowl on Feb. 2, shares of
- the company that owns Fox - have risen 4.5%. It wasn't the
first time a company has reaped a short-term benefit from airing
the Super Bowl.
shares rose 5% in a month after airing last year's big game.
Comcast (Nasdaq: CMCSA)
, which owns NBC, saw an 8% spike in its share price in the month
following the 2012 game on NBC between the New York Giants and
New England Patriots. The 2010 Super Bowl gave CBS an 11% boost
in a month.
The Olympics have had a similar effect. Comcast shares jumped
5.5% in the month after NBC aired the
2012 Summer Olympics
. Perhaps we can expect another big push in Comcast shares in the
Clearly, big-time sporting events - and this summer's World
Cup will be another one - have a profound short-term impact on a
company's shares. What these events mean in the longer term is
more difficult to quantify. But there are less tangible, positive
impacts to having the Olympics, Super Bowl or World Cup air on
For one, you can't beat the exposure. Having hundreds of
millions of viewers tuning into your channel - or channels -
either all in one day or over the course of a few weeks gives
networks numerous opportunities to pump up their own shows. That
tends to have a snowball effect on viewership.
Also, networks able to win the bidding rights to show major
sporting events are essentially telling the public - investors
included - that they are flush with cash. That's also good for
No, the Olympics won't make or break Comcast in the long term.
Nor will the Super Bowl make or break News Corp or CBS.
But the companies that host the events are making loud
statements to their audience on a very public stage. At the very
least, they're projecting an image of success.
And on Wall Street, image is everything.
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