Go for the Gold With Olympic Stocks
"One World One Dream" is the motto of the 2008 Olympics, and for the 10,500 athletes competing in Beijing, that dream is to bring honor to country and sport (and maybe a little cash to themselves). But they're not the only ones looking to bring home some bling from the games. There are also the hundreds of official sponsors and partners and unofficial advertisers whose dream is to cash in on a piece of the Olympic pie.
And the pie looks plenty big. One billion people, or 15% of the world's population, tuned in for the opening ceremonies on August 8, and it's estimated that total viewership will easily surpass the 3.9 billion people who watched the 2004 Athens games.
But many people have a new way to watch the games. Nearly two-thirds of global viewers will be tuning in online, estimates British communications conglomerate WPP. In China, the big money is going to Sohu.com (symbol SOHU), which claims rights to broadcast the games online to China's 1.3 billion people.
On July 28, Sohu.com reported second-quarter profits of $40.2 million, up from $5.7 million in the same period in 2007. That's a tidy 604% increase. And second-quarter revenues of $102 million outpaced those of rival Sina Corp for the first time. Coverage of the games will solidify Sohu.com's brand recognition. The stock closed at $75.16 on August 13.
Google (GOOG) doesn't have Olympic privileges at home in the U.S., but it may feel some lift abroad. YouTube, a Google subsidiary, is carrying exclusive (though not live) video for 77 countries and territories that aren't covered by official sponsors. Granted, YouTube, for which Google paid $1.65 billion in 2006, has yet to contribute even a drop to the behemoth's bucket. In the second quarter, Google generated $5.2 billion in revenues but noted that YouTube had made no "material" contribution to the figure. But a push into material territory, whether generated by the Olympics or not, could draw some investor fanfare. Google shares closed at $500.03.
Unfortunately, you can't cash in on one of the biggest winners: state-sponsored China Central Television, which is carrying the games on Chinese television. Nor can you buy shares of British carrier BBC. But corn-fed General Electric (GE), which is also an official sponsor of the games, should register a boost from its 80% stake in NBC Universal.
NBC paid $894 million for exclusive U.S. broadcast and online rights. Skeptics questioned the move; as little as one month before the start of the games, 15% of ad slots remained unclaimed. But one day before the opening ceremonies, which took place on August 8, NBC announced that it was on track to bring in $1 billion in ad sales from the Olympics. In 2007, NBC Universal contributed $15.4 billion, or 27%, to GE's total revenues of $57.9 billion.
Long-term investors many also appreciate that GE expects industrial-equipment demand from the 2012 London Olympics to eclipse the $700 million in heavy gear it sold for the 2008 Olympics. The company expects total infrastructure spending for the London games to total $100 billion each year from now until 2012. GE shares closed at $29.31.
Count networking-equipment giant Cisco Systems (CSCO) as another long-term Olympics play. If the trends in online viewership continue into the 2012 games, investors should be able to cash in on the global demand for bandwidth. Hundreds of companies arguably fit this bill, but Cisco towers above the rest. The stock, which closed at $24.31, is 29% off its 52-week high.
The official game sponsors comprise a lengthy list of multinationals and Chinese homegrowns, from Johnson & Johnson to Tsintao beer. Among the different levels of sponsorship, only the top 12 "worldwide partners" have marketing rights to the Olympic logo and images from the games. But each of the 12 has plunked down an average of $72 million for those rights, which also covered the 2006 winter Olympics in Turin, Italy. That doesn't count one dime spent on ad spots, so the total tab of being a sponsor can add up.
At least Visa (V), one of those 12 top-level sponsors, is already showing healthy results. On August 8 alone, foreign tourists in Beijing spent $10 million with their Visa cards. Visa closed at $73.93.
Another worldwide partner, McDonald's (MCD), is the official restaurant of the Olympics for the seventh consecutive time. The fast-food chain has opened four new restaurants in Beijing to serve the Olympic venues, including one in the Olympic Village to cater to athletes (presumably after they compete). Its shares, at $62.78, are only a few bucks below their 52-week high.
It's not among the top-12 sponsors, but United Parcel Service (UPS) secured a front-and-center spot as the official express-delivery sponsor of the Olympics. It's a big role: UPS is responsible for making sure all kinds of equipment shows up where it's supposed to when it's supposed to -- a job that will entail some 19 million deliveries. UPS shares closed at $64.60.
Official sponsor Adidas (ADDYY.PK) has already made a splash with two striking ad campaigns that feature big-name Chinese athletes alongside hundreds of ordinary citizens. And because the sportswear company is a sponsor of the Chinese National Olympic Committee, all Chinese athletes will sport the Adidas logo when they receive medals.
The company also just opened a 10,000-square-foot superstore in Beijing -- its largest store in the world -- in a visible move to one-up Nike (NKE), which is already a well-known brand in China.
Although Nike isn't on the official list of sponsors, it's still throwing plenty of cash at advertisement spots. And Nike has secured deals with famous athletes, such as tennis player Li Na and sprinter Asfa Powell, to wear shoes with the "swoosh" logo when they compete. Nike closed at $61.97, while Adidas's American depositary receipts, which trade on the "pink sheets," closed at $32.21.
Viewers of the opening ceremony may have noticed the prominence of the Polo Ralph Lauren (RL) logo at the games. The company is the official outfitter of the U.S. Olympic team for 2008, and the large logo emblazoned on its preppy outfits has already generated criticism and spoof photos in the blogosphere. But any publicity is good publicity, at least in the eyes of investors; the stock, which closed at $69.75, is up $3, or 4%, since the beginning of the games.