There’s a lot of money to be made during March Madness. Much of the anticipated $900 million in direct revenue from this year’s tournament will go to the NCAA and its member schools.
Don’t worry. That still leaves plenty for companies seeking to take advantage of all the early spring round ball hullabaloo.
And for good reason. According to some media reports, over the past 10 years, related stocks have seen positive returns directly attributable to the tournament.
Food And Drink Sales Explode
One obvious target sector is food and drink. Restaurants and bars are packed as fans cheer on their favorite teams. While cheering, they also keep those cash registers ringing.
Outperforming the S&P 500 consistently for 10 years before last year’s tournament, Buffalo Wild Wings clearly wants to be a major “go-to” venue for NCAA round ball fans.
Domino’s ran a 50% off deal early in the tournament designed to keep pizzaholics well fed and returning for more. Last year the company sold more than 1.7 million pizzas during the Final Four alone.
Both companies also have special deals going during the tournament in an attempt to increase sales.
It’s not lost on these two major advertisers that the NCAA March Madness Tournament attracts a huge audience. Last year’s tournament, the highest in 22 years, averaged 11.3 million viewers.
MediaCBS Corp. (NYSE:CBSB) and Turner Broadcasting System, a subsidiary of Time Warner Inc. (:TWCN/A)
These media giants enjoyed $1.1 billion in ad revenue last year and can hardly wait to see how much they will rake in this year.
Double Edged Sword
Despite the overall upbeat nature of March Madness, the net effect of the tournament on investor attention can create problems, according to The Wall Street Journal.
As finance workers, including investors, shift their focus to basketball and away from the bottom line, price reaction to earnings released during the tournament tends to be muted, according to a research paper by Michael S. Drake, Kurt H. Gee and Jacob R. Thornock.
The good news, however, despite – or perhaps because of – the inattention is that the S&P 500 has been up nine of the past 10 years during March Madness. Moreover, the average return has been 2.18%.