It was the winter of our discontent. Droughts in the west, ice everywhere else and rising political threats around the world. Food prices are rising, travelers are stranded in rotting airports and both sides of the political aisle are drifting away from beliefs of the voters they were chosen to represent.
Into the joyless breach steps the unifying seasonal ritual that is the NCAA basketball tournament. It is the most democratic of our traditions. Anyone can fill out a bracket and have a chance to win. You don’t need to understand or enjoy basketball to participate. Choosing not to play, either through apathy or disgust is an expression of our freedom of choice. The tournament cannot be escaped.
March Madness may not be the celebration America wants but it is what we deserve.
As Calvin Coolidge once said “the business of America is business.” Of course that’s true for the multi-billion dollar industry of March Madness. In the attached video Jon Najarian of OptionMONSTER compares the investment merits of four companies directly involved in the tournament.
CBS (CBS): The top seeded company in the East, CBS pays for the right to broadcast the games. In return CBS takes in revenue from advertising and distribution rights. It’s a good business as evidenced by the double in CBS shares over the last two years.
Even the games not on CBS prove to be winners, though for Time Warner (TWX). “For the first time you find that channel to watch that you now care about,” Najarian notes. That creates more ad revenue and as a bonus viewers might actually go back to the station in the future.
Buffalo Wild Wings (BWLD): The top seed in the West is a play on sports fans coming together and hanging out for hours in front of multiple televisions while munching down high-calorie and fat-margined food. Commodity prices have soared but Buffalo Wild Wing shares haven’t been hit. The reason, in Najarian’s mind, is that the restaurant sells plenty of beer and booze to wash down those spicy treats.
If history has taught us anything it’s that betting against American gluttony is a bad idea. Buffalo Wild Wings is executing on their business model, crushing short sellers with a 77% gain over the last year.
Anheuser-Busch InBev (BUD): Nothing says “melting pot” like making a Belgian beer company in the top seed in the Midwest. In reality Bud is a roll-up of about 200 different beer brands. If you like your brew it’s hard to avoid Bud products. As Najarian points out many, if not most, of the so-called “craft brews” you find at your local beer hall are actually Bud products.
Bud shares have been lagging the tape over the last year but there are few things less economically sensitive than beer.
Coke (KO): Much like Bud, Coca-Cola is a beverage rather than a single-product brand as the name implies. Coke sells water, juice, energy drinks and, coming soon, coffee. Coca-Cola is the number one seed in the South because of its excellence in execution and unparalleled ability to transcend the core market for soda pop.
“If people aren’t drinking beer they’re going to be enjoying a Coca-Cola product,” Najarian says, “A lot of this is going to move”.
Najarian likes all four plays but narrows it down to two favorites, depending on investors’ risk tolerance. Buffalo Wild Wings has more volatility but a bigger potential pay-off. For more patient investors CBS is hitting on all cylinders and figures to extend its reputation as the Tiffany Network during March Madness and this fall when it begins airing Thursday night NFL games.