Super Bowl Stocks
It's not the best stock-picking strategy, but research shows that shares of the companies with the most-popular ads during the big game get a bump.
Desperate for a sign -- any sign -- that the stock market will turn around this year? Robert Stovall, the veteran strategist at Wood Asset Management in Sarasota, Fla., suggests paying attention to the Super Bowl Predictor.
According to this simple guide, the Dow Jones industrial average rises in years when an original member of the National Football League wins the Super Bowl. When an old American Football League team wins the championship, the Dow falls that year.
This market prognosticator has worked 79% of the time, says Stovall, who, at 82, has been in the investing business for more than five decades. That's a very positive indicator for stocks because the Cardinals and the Steelers were among the original NFL teams that merged with the upstart American Football League in 1970 to form the current NFL.
Of course, Stovall says -- and we agree -- that you should use the Predictor mainly for entertainment purposes. If you want a potentially more reliable gauge of what the market will do after the Super Bowl -- this year's game takes place February 1 -- don't worry about the action on the gridiron. Instead, watch the TV commercials. According to academic research, stocks of companies that advertise during the Super Bowl have received a short-term boost in the past.
A study by the University at Buffalo School of Management and Cornell University found that when ads received a favorable response from sports fans, there was a rush to buy the stocks of the advertisers -- and a corresponding jump in their share prices. The researchers, who looked at 529 commercials that ran during 17 Super Bowls from 1989 to 2005, culled ratings from the USA Today "ad meter," which tracks how much consumers like the ads.
Then they checked whether the most-popular ads generated a spike in the stocks. And that was, in fact, the case, says Kenneth Kim, an associate professor of finance at the University of Buffalo. On the Monday after the Super Bowl, shares of companies that produced the ten most-popular ads outpaced Standard & Poor's 500-stock index by an average of 0.26 percentage point. Although the number may seem small, that's actually a fairly significant amount of outperformance for one day. What's more, as time went on, the gains continued.
The study, which tracked the stocks only for a few weeks after the big game, also found that share prices of the companies behind the least-popular ads rose as well, although to a smaller degree.
While the correlation is fodder for conversation over guacamole at a Super Bowl party, it's obviously not the best way to pick stocks, says Kim. However, given the economic uncertainty and market volatility, he expects to see share prices of advertisers advance again this year. "During times of uncertainty, we hang on to such signals even more," he says.
In fact, Kim says, some investors have taken his research pretty seriously. When a press release went out recently about his findings, he says, he received calls from hedge funds and money managers who wanted to see the raw data.
So who's advertising this year? Among publicly traded companies, there's the usual mix of beverage producers and consumer-products outfits. Among them are Anheuser-Busch InBev (symbol AHBIF.PK, $27.10 as of the market's January 28 close), the product of the recent merger of Anheuser-Busch and InBev; Coca-Cola (KO, $43.86) and PepsiCo (PEP, $52.04); automakers Audi AG (AUDVF.PK, $615) and Hyundai Motors (HYMLF.PK, $57.64); and tire maker Bridgestone (BRDCY.PK, $26.65). (The stocks with symbols ending with "PK" are of foreign companies that trade on the pink sheets, the non-Nasdaq over-the-counter market.).
Also hawking their products and services during the game will be tax preparer H&R Block (HRB, $21.51); Dreamworks Animation SKG (DWA, $22.26), the movie company; CareerBuilder.com, owned by Gannett Company (GCI, $7.33); Denny's (DENN, $1.89), the restaurant chain; and Monster Worldwide (MWW, $10.76), the online job-listing company.
The post-Super Bowl pop in share prices would almost seem to justify spending $3 million for 30 seconds of airtime. Then again, nothing is guaranteed. In fact, to test his own research, Kim kept track of which ads he thought would be winners as he watched the Super Bowl last year. In the end, he was wrong. "You can't make money off this strategy because you don't know which ads will be liked," he says. "It's harder than stock picking -- it's ad picking." At the very least, it gives you something to talk about if the game is a blowout.