Visually Compelling TA

One of my three themes for SLO2 is consumer stocks. While watching an episode of the country's highest-rated show, American Idol, I noted each commercial I saw with intentions of constructing an American Idol portfolio. While initially a whimsical exercise, I was smitten by the stellar collection and have been thinking such a portfolio might be quite lucrative. The nineteen publicly-traded stocks have a combined market cap of more than a trillion dollars.

First, the value of consumer branding is based on repeated positioning of its image in the minds of consumers. By placing ads on such a highly-viewed broadcast, these companies are increasing their intangible goodwill. These are growers - their median EPS growth is 12%.

Second, the ability to promote oneself on the show is not cheap suggesting these companies have cash to spend on branding themselves via this vehicle. Reportedly, AT&T, Coca-Cola and Ford are each paying about $35 million for commercial time, online content, co-branding and to be featured during American Idol. These are cash producers - fourteen of them pay dividends.

Finally, consumer stocks have been avoided by a market that assumes the consumer is "tapped out." This has resulted in some compelling values. Half of these are trading below their 200-day moving average.

The following is the list of all ads I saw on the night of the exercise. First is product advertised, second is the symbol of the parent company, and third a brief comment. Note some of these may be locally placed ads or cable company overwrites so your ads may vary.

• AT&T (T). Exclusive provider of phone service for Apple iPhone users.
• Olay (Proctor & Gamble - PG). Pervasive consumer consumables company continues to grow.
• Toyota (TM). Global automaker making entry into India.
• Vitamin Water and Minute Maid (Coca-Cola - KO). Beverage purveyor continues to see volumes rising.
• Apple (AAPL). Continued strong earning and revenue growth. One of the SLO contest largest collective holdings.
• McDonalds (MCD). Global fast food giant has no peers.
• Kraft (KFT). Packaged food company recently reaffirmed 2008 guidance..
• Waterhorse movie (Sony - SNE) Global electronics giant appears fairly priced.
• Colgate (CL). Company expects double digit earnings per share growth this year.
• Fox Shows (News Corp - NWS). Media conglomerate continues to aggressively acquire more media properties.
• Avon (AVP). Beauty products company is expanding sales in Latin America.
• Ford and Mazda (F). Despite slipping North Amercian sales, the company managed to post a profit in the most recent quarter.
• H&R Block (HRB). Services company recently unloaded its Option One mortgage loan servicing unit.
• Weight Watchers (WTW). Weight management company growth is in double digits.
• Hanes (HBI). Apparel maker tripled profits in its last earnings announcement.
• Wendy's (WEN). Being acquired by Triaric.
• Payless Shoes (Collective Brands - PSS). Shoe company's gross margins are increasing.
• Applebee's (IHOP Corp - IHP). Same store sales at both IHOP and Applebee's restaurants are increasing.
• Arby's (Triarc TRY). Acquiring Wendy's.

These ads do not appear to have a parent company tradable for this contest.
• Loreal and Garnier (traded on Paris exchange)
• Subway (Doctor's Associates - privately held)
• New Balance (privately held)
• Krystal (privately held)
• Local Fox Affiliate (privately held)

Finally these ads were from nonprofits.
• Alliance Climate Change (lobbyist - N/A)
• DTV Answers (lobbyist - N/A)

I plan to watch for good entry points for these companies as the consumer portion of my SLO2 portfolio evolves.

Comments: View Comments |  Saturday May 3, 2008