Rams Or Bengals? Why My Super Bowl Indicator Favors The Bulls

It happens every year. After a season of intense competition, America’s top talent goes head to head with the rising prospects of a new generation on Sunday . . . and that’s just in the commercial breaks.

Football is has become a national obsession because it reflects who we are: competitive, passionate, tenacious. We never quit until the last second ticks down.

And unless you field two evenly matched squads, there’s no real game. Much like Wall Street, where you need big muscle on both the “buy” and “sell” ends of the trading desk, truth is revealed in the clash . . . and not the consensus.

After all, stocks usually go up and champions make money as long as there’s a clear winner, which is why I’m not a huge fan of the so-called “Super Bowl indicator.”

The teams in question aren’t the bulls and the bears. It’s the Bengals and the Rams this year. As long as they both give it their all, all investors are rooting for the home team.

A Long Way From The 1970s

Forty years ago, when an AFL or AFC team won, Wall Street braced for a bad year. But that just hasn’t been true for decades. Now, in general, stocks tend to go up either way.

The only distinction is how high they go and how often the market defies the larger trend. If history is any guide, picking the Bengals could foreshadow a 20% rebound for the S&P 500 by the end of the year, leaving the index at roughly 5,400.

History suggests that as an original NFL legacy, a Rams win would give the market a slightly smoother ride. Ironically, the statistics can be read in reverse . . . if you’re convinced the Fed, stretched stock prices and geopolitical questions are going to keep investors guessing, the odds slightly favor the Bengals for their conference’s more volatile track record.

But the distinction isn’t really worth changing your portfolio. NFC or AFC, the market usually goes up 7-10% a year. All Wall Street wants is a clear winner.

Stocks are simply a good investment either way. Of course you need the right stocks to stay ahead of inflation and the Fed, but that’s why I prefer to pick individual stocks and not the market as a whole.

And until we see publicly traded football franchises (an interesting idea), obsessing over the intrinsic strength of each conference won’t produce any coherent trading ideas. Winners and losers just don’t translate to the kind of fundamentals that move the market over time.

To get any sense of the fundamentals driving Sunday’s game, you need to obsess over the ads.

Between The Plays

Terrible companies can make great Super Bowl commercials. I think back to the dot-com era when most of the ads were iconic . . . and the companies behind them failed anyway.

Even more recently, a viral brand message hasn’t been a guaranteed defense. Anheuser-Busch Inbev (BUD) made a splash three years ago with the “Dilly Dilly” catch phrase, without beckoning a lot of people to the beer or the stock.

In fact the stock has basically been cut in half since those ads came out. I’d buy it now, regardless of the ads we see on Sunday or the buzz we hear on Monday morning.

And of course Budweiser is a mature consumer brand. We know what it is. BUD isn’t going to create new markets on a single evening.

But every spot BUD fills will keep a potential rival from getting mass exposure. For brands like this, being part of Super Bowl tradition is defensive. You do it to keep other companies from scoring.

Looking at the roster of this year’s ads, I doubt Amazon (AMZN) or Nissan (NSANY) or Pepsi (PEP) is going to rise or fall on Monday morning. We’ll talk about the ads. The number of people with Prime memberships driving Sentras and eating potato chips is not going to change much either way.

At this scale, one evening is not going to move the needle. Successful ads will become part of more extended marketing campaigns. Flops won’t kill stocks.

Wall Street looks farther out. Remember Ridley Scott’s iconic 1984 Apple commercial? Controversial, visionary, prophetic . . . right?

The stock went nowhere on Monday morning. And in two weeks, it was down 20%. Over the next 13 years, Apple mania came and went.

We talk about the commercial today. I’m sure some of the ads we see on Sunday will pass into our collective consciousness in much the same way, opening minds but not markets.

For start-up companies gambling big on exposure, that can be a colossal waste of money. I’m not overly optimistic in the long-term fate of any of the crypto hopefuls whose names we’ll see on Sunday, for example.

The Super Bowl is not amateur hour. It’s not for the fresh kids of the corporate world. And it doesn’t mint a lot of breakout investment opportunities.

If you want to put money to work based on the ads you see, buy pure plays in the ad industry like Omnicom (OMC). The only people getting rich here are the agencies.

IPO Insight: Make Or Break For SQSP

One Super Bowl advertiser reminiscent of the dot-com boom will probably make waves with its commercial . . . but the tide won’t reach Wall Street.

I had high hopes for Squarespace (SQSP) early on. The company’s platform makes it a lot easier to build and maintain web sites, effectively taking over the traditional web developer role.

But its IPO was not well timed. Now, even though Zendaya is starring in its Super Bowl ad, it feels like the company will need years to deliver on its early promise.

Management will need to hustle. Meanwhile, if you made me pick a recent market debut with real Super Bowl buzz, it wouldn’t be SQSP.

ZipRecruiter (ZIP) isn’t blowing its ad budget on a Sunday slot. Its commercials run in more affordable positions where management can see the ROI.

The stock has performed a lot better as well. We made money on ZIP . . . not so much on SQSP.

And again, the real winner buys the marketing stock and not the companies that pay the marketers money. Sprout Social (SPT) is that kind of name, turning buzz into actual revenue.

One SPT at the right time is worth a lot of SQSP. It’s not a flashy company. You won’t see its commercials on TV.

They’re too busy to advertise. And that’s the kind of company I love.