With the Presidential Election just nine months away, now is a good time to start considering how 'you' the average American can benefit from this once every four-year circus event. I recently spoke about how it's likely firearm stocks could see a boost from this event, today I would like to discuss another industry likely to see revenues increase.
But, before we jump into how you can make money this election season, let's take a look at what is making this all possible.
During the 2008 Presidential Election more than $7 billion were spent according to Borrell Associate's estimates. In 2012, election spending was estimated to hit $9.8 billion. But as of now, the 2016 election cycle is expected to see $11.4 billion spent. Now these figures are not just for spending on Presidential campaigns, but all political office's votes will be held for this year.
Furthermore, as in the past, it is expected that the majority of this money will be spent on advertising. This means the media industry is likely to see a jump in revenues and earnings over the next few months as political ads begin to be shown across the nation. Before we go any further, maybe you're thinking, well media companies already have advertisements, why would a political season increase the amount of money they make, a TV show only has so much time to show ads? While that is true, the big difference during a political year is that there is more competition competing for the limited advertising time, thus, the media networks can charge more money per ad. (Think SuperBowl ads that cost millions for just seconds of airtime.)
Alright, so if you haven't guessed, buying media stocks today and holding them at least until after election day, may be a great way to make some money while you have to suffer through all those annoying political advertisements and actually by investing in the industry, you may not get annoyed when you have to sit through an ad, but be happy knowing you are making money every time you see one.
And while you could go out and just buy shares of Time Warner Inc. (NYSE:TWX), Time Warner Cable Inc. (NYSE:TWC), DISH Network Corp. (NASDAQ:DISH), The Walt Disney Company (NYSE:DIS), or another TV network, cable company or media outlet you prefer, why not just buy all of them?
With the help of a few Exchange Traded Funds (ETF's), you can do just that. The cream of the crop for media focused ETF's is going to be the PowerShares Dynamic Media ETF (PACF:PBS). The PBS has over 70% of its assets in the Media & Publishing sector, making it the heaviest media focused ETF available today. This ETF has also been around since June of 2005, has an expense ratio of 0.62% and more than $88 million in assets under management. It currently yields 1.25% and the top 10 holdings, which are names like Time Warner, Alphabet Inc. (NASDAQ:GOOG), Facebook Inc. (NASDAQ:FB), CBS, DISH, and Walt Disney to name a few make up 46% of the fund. On a performance basis the fund is down 14% over the past year, with 11% of that occurring year-to-date, but with heavy political ad spending in the near term, this fund is likely to see its value increase.
While the other two ETF's I would like to point out aren't as concentrated in the media industry, they will offer great upside if political spending helps the media stocks while providing more diversity if you are not sold on the idea of that industry performing well during the political season.
The first is the Consumer Discretionary Select SPDR ETF (PACF:XLY). The XLY has over $9 billion in assets under management, has an expense ratio of just 0.14%, and a current distribution yield of 1.6%. The funds inception date is December of 1998 and it currently holds 87 different stocks, with Media & Publishing making up the largest amount of its assets at 23%, Specialty Retailers making up 19.5%, Hotels & Entertainment comprising 18.2% and Diversified Retail Accounting for 17.5%, with much smaller shares going to a few other industries). Within its top 10 holdings, media names such as Walt Disney and Comcast can be found. Over the past year, the fund is down 4.88%, 10.7% of that coming year-to-date, but is up more than 12.75% over the last three years.
The other more diversified ETF is Vanguard Consumer Discretionary ETF (PACF:VCR). VCR has $1.74 billion in assets under management, has been in existence since 2004, carries an expense ratio of 0.10%, is currently yielding 1.43% and has the highest number of holdings at 383. Media & Publishing makes up 23% of the fund while the other top sectors are all the same as the XLY. As for the top 10 holdings relating to media stocks, Walt Disney, Comcast are again found, but the VCR also has Time Warner and Time Warner Cable in its top 10. But, even with a much larger number of stocks than the XLY, its performance has been about the same, down 5% over the last year and up 12.83% over the last three years.
Final Thought
Regardless who you may be voting for this political season, you could be a winner if you invest in the media industry, especially now before these companies start publishing earnings reports before the political spending has been spent.
Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor held long positions in Alphabet, Walt Disney, and Facebook at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
