We're about to enter a presidential-election year, which means candidates will spend big money on print and broadcast advertising. If you live in a swing state like I do, the ads will soon be relentless -- you won't be able to turn on the radio or TV without a barrage of political jabs and counterpunches.
The Republican presidential primary that includes pretty much everyone except me will mean more-aggressive ad spending than usual in the year's first few months. And once we get to the conventions and settle on candidates, the fur and dollars will really start to fly.
Publicly traded companies that own newspapers or broadcast media stand to reap a financial whirlwind, and a few of them are reasonably attractive in price right now. Consider:
Salem Media Group
Salem Media (SALM) has to be a top pick for 2016. The company's broadcast, publishing and digital-media divisions all produce content that's targeted toward conservative Christians.
As a result, SALM's Web sites and radio networks will be heavy battlegrounds for Republican candidates, and the ad dollars should flow nicely until the GOP's convention. And I expect to see heavy ad spending continue even after that, just to keep the base energized and strongly supporting the party's nominee.
Salem has a solid collection of 117 radio stations, including 72 in the nation's top 25 markets. That makes the company the biggest game in town to reach this key Republican constituency.
Even though Salem already pays out around 20% of free cash flow to shareholders, management recently hinted at a dividend increase.
CEO Edward Atsinger said during SALM's latest earnings call: "Given the increased political revenue in election years, the increased page views on our conservative-opinion Web sites and the fact that Regnery (the company's publishing unit) tends to perform better in election years, we should see a meaningful increase of free cash flow in 2016."
I've been a fan of A.H. Belo (AHC) and its long-term potential for some time now. I know newspapers are dead and the only ones who read them are old fuddie-duddies like me -- but there are lots of us, we still like to read an actual newspaper and we're living longer than ever before.
The dog and I start almost every day with a 2.5-mile morning walk around our neighborhood, and I see how many of my neighbors still take the Orlando Sentinel. It's well over half.
Belo also owns The Dallas Morning News, Briefing and the Denton (Texas) Record-Chronicle newspapers and their sister Web sites. The company also publishes Al Dia, a Spanish-language newspaper that could see lots of spending as candidates go after that coveted demographic. Lastly, AHC owns commercial-printing and direct-mail services.
The company has a generous dividend policy, with shares currently yielding more than 6%. Politics should be profitable for the stock, and most AHC analysts expect a large 2016 earnings increase.
It will be hard to win the presidential race or certain statewide races without the Hispanic vote in 2016. That's partly why one of my favorite "Five-Year Long-Shot Stocks" is Tribune Publishing (TPUB), America's largest Hispanic-newspaper publisher.
TPUB should get a lift from targeted spending in both the primary and general elections. The stock has gone down since I first suggested it, but I nonetheless like the company's long-term outlook. It's a highly levered long shot, but a small position could lead to some pretty large long-term profits if I'm right.