I realized how the digital media revolution was creeping up on us in unexpected — and not necessarily sexy — ways about 18 months ago.
It wasn’t while buying a high-def TV or surfing the ‘Net or sitting through the umpteenth panel on new media, but while standing at a bus stop in New York City.
Back East on assignment after several years of absence, it suddenly hit me that bus stop signs were constantly updating themselves, that electronic ads on the top of taxicabs were constantly changing, and that huge billboards on the way into Manhattan were morphing into different blurbs by the minute.
The cumulative effect of it all was impressive.
I wasn’t the only one to notice, or wonder who would be making money off this evolution.
CNBC’s Jim Cramer, he of “Mad Money” fame, has specialized in ferreting out companies that no one else is noticing. While not a huge fan of media stocks in general (he thinks print is going to the dogs and has often pooh-poohed the movie studios), last week he talked up a couple of stocks associated with, of all things, the outdoor billboard biz.
Cramer’s show, like cabler CNBC as a whole, is benefiting from the buoyancy in the stock market and a nationwide phalanx of small investors. Judging from their call-in questions to financial shows like Cramer’s, these soldiers of fortune are increasingly savvy about the forces impacting publicly traded companies and the workings of Wall Street.
There may also be new urgency on the part of individual investors to get in on the act, before many more companies, including media targets, are taken out of the public sphere by voracious private equity firms.
Cramer’s two picks are not unknowns, nor are they trading at bargain-basement prices: Daktronics, which makes digitized billboards, not only for places like NYC but also for highway signs and high school football stadiums, and Lamar Advertising (a main competitor to CBS and Clear Channel’s Outdoor divisions) are, to his mind, the best picks in that “old media” space.
Cramer exhorts his viewers not to subscribe slavishly to a “buy low, sell high” investment strategy but rather to hook up with stocks that may already be trading at high multiples but are likely to go still higher. Daktronics is at an alltime high slightly below $40.00, with a whopping P/E of 60; ditto for Lamar, which is trading at around $63 (with a daunting P/E of 150), off a two-year low of $38 and a couple of notable downgrades in September, when it was trading at $55.
Neither, in other words, could be called a steal at this point.
Like most people in the media, I’m occasionally asked by folks not in the media what’s the hot Hollywood stock to invest in. It would not havesolidified any friendships had I suggested any of the major studios for the past five years, though both Time Warner and Disney have shown healthy upticks recently.
But if, as everyone keeps abjuring, we are in the middle of huge shifts in the media landscape, there are bound to be new ways to make money out of this.
To those focused on the media, think about the companies behind the glitz, or startups in support services, both high and low-tech: Who makes the boxes that all those X-Boxes and PlayStations are shipped in, or those irritatingly hard-to-remove stickers on the spines of DVDs and CDs? Who supplies the red carpets that nowadays every high school prom, let alone every film premiere, has to roll out?
Or on other fronts, who’s setting up VOD channels on digital tiers here or abroad? Who’s running research outfits to help the bigger players navigate complicated media scenes like those in China or India?
You get the point: Getting in on something stodgy but essential to the biz, or something newfangled but far-sighted, may be more profitable than investing in the likes of Time Warner.
Unless, of course, you were prescient enough three years ago to buy in at $10 a share.