Market Insights

The 2020 Presidential election cycle gets rolling with the first debates tonight. There’s one sector investors may view as winners regardless of which candidate emerges victorious.

Traditional television companies like Nexstar Media (NXST) and Sinclair Broadcast Group (SBGI) have been singled out as key players in the next 17 months of campaigning because of their close ties to grass-roots audiences. Did you know more than half of political spending occurs at the local level?

NXST, for instance, enjoyed a 1,000 percent surge in political-ad revenue because of the mid-term elections in the fourth quarter of last year. SBGI had a similar bump.

“We expect 2020’s political advertising to be yet another record year for us, with some of the ad spending expected as early as the fourth quarter of this year,” Sinclair CEO Chris Ripley said back in February.

Debates Back to Back

Ten Democrats will take the stage in Miami tonight, followed by ten more tomorrow. Their place is determined by a combination of fund raising and poll standing. The event marks the beginning of what could be one of the most heated election years in American history.

Many of the issues will probably be of little interest to investors, especially as Democrats scramble to outdo each other in their attacks on President Trump. However, some of them may find common ground with the Republican President — particularly after Monday’s executive order on medical-cost transparency.

That could keep the health-care industry in the dog house through the whole process. Drug stocks like Mylan (MYL) and Teva Pharmaceuticals (TEVA) have borne the brunt of that so far. Insurers and pharmacies have also taken a hit, while medical devices have mostly been immune to the pressures.

Just the opposite may be true for solar-energy stocks, already the best-performing industry group this year. Democrats have a long history of supporting green energy.

Politics Are Local

Let’s get back to television companies. In some ways tonight’s debates matter less for them because they deal with candidates for president and not Congress. However, these companies have established themselves as a go-to set of names for investors seeking exposure to election cycles.

That distinguishes them different from the dominant names like Walt Disney (DIS) and Comcast (CMCSA). Given the crowd of Democratic presidential candidates, next year could also see more primary-focused advertising than usual before the party’s July 13, 2020, national convention.

Here are the four pure-play TV stocks:

• Sinclair Broadcast Group (SBGI): Weighing in at $4.8 billion of market capitalization and 193 stations reaching 40 percent of U.S. households. It’s also the best performer with a gain of more than 100 percent so far this year.
• Nexstar Media (NXST): A $4.6 billion company with 173 stations. NXST is one of the best-performing stocks since the financial crisis, rising more than 17,000 percent from its 2009 lows.
• Tegna (TGNA): Created when the old Gannett (GCI), publisher of USA Today, split off its old television stations.
• Gray Television (GTN): The $1.6 billion company is the smallest in the group, and the worst performer in 2019. It rallied in April after hiring Greta Van Sustern, only to crash on weak results the subsequent month.

In conclusion, the 2020 elections are still more than a year away. But this cycle could be especially intense because of the personalities involved and the number of candidates. Meanwhile, ad spending continues to rise. Hopefully this post helps you know some of the companies that could be impacted along the way.