March Madness Fuels These Two Stocks

Florida Gulf Coast’s miraculous run. Trey Burke’s 30-foot three. Wichita State’s “shocking” upsets of Ohio State and Gonzaga.

Those are the unforgettable moments that make March Madness priceless for viewers. For CBS (NYSE: CBS), they’re worth a lot more than that.

CBS stock rose 7.6% in March. It’s the fourth straight year that the media company’s shares have experienced a sudden surge in the third month of the year.

That’s the power of March Madness. The most watched (and gambled on) sporting event in America, aside from the Super Bowl, airs on CBS and its sister networks, TBS, TNT and truTV – owned by Time Warner (NYSE: TWX). Prior to last night’s championship game, the NCAA Tournament was averaging 10.2 million viewers – most since 2005.

Viewers are turning out in droves to watch all the drama unfold. That’s why CBS and Time Warner paid a record $10.8 billion for the rights to air March Madness through 2024. Like the Super Bowl (which, coincidentally, CBS also aired this year), March Madness is a cash cow for the network. In terms of ad revenue, it’s the most profitable sporting event in America.  

For the 67 games that aired between March 17 and last night’s thrilling championship game (won by Louisville), total ad revenue exceeded $1 billion – larger than the haul of any other sport’s postseason. That’s the advantage of having over 150 hours worth of games available for companies to cram in their ads.

March Madness has been equally fruitful for Time Warner. Since its networks began airing NCAA Tournament games in March 2011, TWX shares have risen 53%. The stock was up 8.5% this March alone – outdoing its television partner.

CBS, meanwhile, is continuing an impressive run that began two weeks before it aired this year’s Super Bowl. Since January 16, CBS stock is up an even 19%. The run should continue at least through the rest of the week – The Masters, golf’s most prestigious and watched sporting event, airs on CBS starting this Thursday.

Essentially, CBS is this year’s Comcast (NASDAQ: CMCSA). Last year’s Super Bowl and the 2012 Summer Olympics aired on NBC, which is owned by Comcast. Those two sporting events gave the stock a major boost, pushing Comcast shares up 58% in 2012.

Now, sports are fueling a rally in CBS’ stock.

Moral of the story? Always be aware when a public entertainment company’s network is about to air a major sporting event. Chances are, it’s about to go on a Cinderella-like run.

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