Every year this week, March Madness sweeps the nation. Millions of Americans—many of whom haven’t watched a second of college basketball all season—fill out a bracket in the hopes of winning their office pool with the right combination of luck, guess work and research. Sounds a lot like picking stocks, doesn’t it? Which brings me to March Madness stocks.
OK, so there’s no such thing as March Madness stocks, per se. But there are publicly traded companies that benefit greatly from the nationally televised, month-long cash cow disguised as a 68-team basketball tournament. Do investors snatch up certain stocks in March more than others based purely on the tournament? Perhaps not. But they might in April or May when those companies report boffo quarterly earnings, driven in part by March Madness-related sales.
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With that in mind, here are two companies that traditionally benefit greatly from the big business of March Madness, one of which is already trending in the right direction - a rarity in today’s Russia/Ukraine and inflation-plagued stock market. If you’re filling out a bracket as you read this, think of these as the Duke, North Carolina and Kentucky of March Madness stocks.
March Madness Stock #1: Paramount Global (PARA)
Paramount Global is the new name for ViacomCBS, the company that owns the CBS Broadcast Network, among several other cable networks. Here’s how valuable March Madness is to CBS: the broadcast network has been airing the NCAA Tournament since 1982, and its current joint TV deal with Turner Sports runs through 2032, which the two companies paid a combined $8.8 billion for in 2016. It’s easy to understand why: March Madness means hundreds of hours of must-see TV, and (seemingly) thousands of commercials for which companies like Coca-Cola (KO), AT&T (T), Capital One (COF) and Pizza Hut pay more than $1.5 million per 30-second spot.
So it’s no coincidence that Paramount is in line for a big first quarter. Analysts anticipate record Q1 sales ($7.45 billion), a modest 2% improvement over the first quarter a year ago but a higher tally than all but the fourth quarter of last year ($8 billion).
Meanwhile, PARA stock has recovered nicely from an early February bottom: it’s up 29% since then, and is trading above its 50-day moving average, though at 36 is trading well below its peak a year ago above 100 per share. That means it has plenty of upside; trading at 12 times forward earnings, it’s also quite cheap.
March Madness Stock #2: Nike (NKE)
You’ll see 68 different team jerseys over the next three weeks, and most of them were designed by Nike. Last year, 48 of the 68 schools in the tournament wore Nike-brand jerseys, shoes and warm-up T-shirts. (By comparison, Adidas (ADDYY) and Under Armour (UA) sponsored a combined 20 schools.)
With millions of people watching those teams play for almost a solid month, that’s a lot of exposure for Nike apparel. Knowing that, Nike typically debuts new jerseys for certain high-profile schools in an effort to convince fans or alums of those schools to discard their old team jerseys and buy the new ones. The strategy seems to work: Nike did $12.34 billion in sales in its March quarter a year ago, a record amount that was nearly double the $6.31 billion in sales the previous year, when the NCAA Tournament was abruptly canceled at the onset of the pandemic. Analysts are expecting another record this year, estimating $12.88 billion in revenue.
Nike could use a record quarter right about now. Nike stock has lost roughly a third of its value since the early-November top for growth stocks, hitting new 52-week lows last week. So I wouldn’t buy NKE until it stops its free fall. That said, this is Nike we’re talking about. The stock has more than doubled in the last five years, has more than quadrupled in the last 10 years, and has fallen only once in the last 13 years.
For long-term investors, this could be a great time to buy one of the market’s great growth stocks when it’s trading 33% below its recent highs. But I would wait for the stock to stop the bleeding first.
Some years, I might suggest another March Madness stock or two, but supply-chain issues have weighed on the retail sector of late, and the bear market in growth stocks has yet to show signs of a recovery. Still, these two options - one on the uptick, another usual stalwart that can be had at a deep value once it stops falling - should benefit greatly from the next month.
Enjoy the games - and, hopefully, the profits!
Do you own any other stocks you think might benefit from March Madness? Tell us about them in the comments below.
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*This post has been updated from an original version, published in 2019.
