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Subliminal Marketing Mavericks

Posted: Feb 18, 2009 15:51 PM by Gregory S. Davis

Tickers in this Article: CVS, ACV, WFMI, TIVO, TWC, AVP, EL

Why spend the time catching "24", "Ugly Betty", "The Game" or "Top Chef" when you can use your TiVo (Nasdaq:TIVO) or DVR recorder from, let's say, Time Warner Cable (NYSE:TWC) to record the show and catch up on it over the weekend? The convenience for viewers is a business problem for television advertisers. One method growing in popularity is product placement in popular programming. Let's take a look at a few shows and companies exercising their subliminal marketing capabilities.

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Short List
According to the Tuned In Journal produced by Rob Owen of the Pittsburgh Post-Gazette and data from the Nielson Co., following is a sample list of publicly traded companies that engaged in product placement in 2008 and elicited a positive opinion of the brand.

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CVS Pharmacy
"Extreme Makeover: Home Edition" on ABC is a reality-TV show in which a deserving family is chosen to have its current home demolished and a new home constructed with extra design specifications to make life at home an absolute dream. CVS Caremark (NYSE:CVS) is contracted to provide supplies and pay bills for the selected families. CVS Caremark is down 31% over the past 12 months ending February 13, but given its low 0.75 price/earnings to growth ratio, its expected three- to five-year earnings potential provides a strong signal for growth. (To learn more about the price/earnings to growth ratio, be sure to read PEG Ratio Nails Down Value Stocks.)

TRESemme by Alberto-Culver
"Project Runway" on Bravo is another reality-TV show in which aspiring fashion designers sew and stitch their way toward becoming crowned the show's new top fashionista. Alberto-Culver’s (NYSE:ACV) TRESemme product line supplies prizes to the winners. Alberto-Culver’s stock offers a low correlation to a broad market index like the S&P 500 given its low beta of 0.4. Although it is smaller in terms of revenues and market capitalization than other personal care product providers like Avon Products (NYSE:AVP) and Estee Lauder (NYSE:EL), its stock has outperformed both over the past 12 months through February 13.

Whole Foods Market
"Top Chef" is another popular Bravo reality-TV show in which chefs and cooking aficionados compete in a series of challenges and quick fires to become the show's champion. Contestants on multiple occasions are given a set amount of money and 30 minutes to comb through the aisles of Whole Foods Market (Nasdaq:WFMI) for their next culinary creation. Whole Foods stock has fallen 70% over the past 12 months. Although the company has decided not to release comparable same-store sales estimates for fiscal year 2009, citing the rapidly changing economic environment, Whole Foods is hoping the combination of advertising, new store openings at the end of 2008 and a recovery in economic conditions will continue to grow its business.

Final Thoughts
The downturn in the economy in the short term will make it difficult to determine how product-placement ads will translate into stock market performance. As an investor, the takeaway is to notice when the next product or service slides into your favorite show as a sign of advertisers changing with the times in hopes of boosting future revenues.

By Gregory S. Davis

Gregory S. Davis is the owner of G. Davis Capital, a Registered Investment Advisor with the state of North Carolina dedicated to providing independent investment research and education. His core methodology for choosing investments includes going against emotion eliciting headlines while focusing on asset diversification. G. Davis Capital also publishes the ETF education website, ETFReady.com . Gregory is a graduate of the Wharton School of Business and he has received an MBA from Bowie State University.

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