"It’s a pure play on spending for the election," said Jon Najarian, co-founder of TradeMonster.com and a ‘Fast Money’ trader. "You can tell by the outperformance of CBS over the more mixed media properties."
CBS shares are up more than 20 percent this year, compared to a paltry 4 percent return for ABC’s Disney and an unchanged move by News Corp., parent of Fox. CBS was spun out from Viacom in 2006 to remove the broadcast assets from the faster-growing film and cable divisions. CBS’s stock is still lower than the spin-off price four years ago.
Advertising on the mid-term elections this year will rise by more than 25 percent to $2.5 billion from the record 2006 mid-term spending, according to The Hollywood Reporter. A heated political fight where the incumbent Democrats are clinging to the House of Representatives is fueling the big push, along with a Supreme Court Ruling earlier this year loosening restrictions on corporate contributions.
Investors figure there’s no better place to spend your money than the network that won the first week of the Fall TV season with new hits like Shatner’s "$#*! My Dad Says" and Selleck’s family cop drama "Blue Bloods."
"With the highest overall exposure to advertising among its peers, CBS has the most near-term leverage to the ongoing advertising recovery," said Doug Creutz, Cowen and Company analyst, in a note following the company’s earnings in August. "We expect CBS to be the most significant beneficiary of what could be a strong broadcast scatter market this fall, as well as the impact of political ad spending in the second half of 2010."
To be sure, analysts see the gains as limited given the longer-term growth issues facing CBS and all broadcast networks as digital distribution changes their whole ad-spending models. Najarian noted that a big player was putting on a complicated options trade that would pay off once CBS hit $19 in December, only about $2 from here.
But if you’re looking to hit voters in an election season that may skew towards the older generation, then there’s no better place to advertise than on CBS, whose viewership has a median age of almost 55 according to Nielsen.