In this article, we will take a look at the 10 best advertising stocks to buy now. You can skip our comprehensive analysis of the advertising industry and go directly to the 5 Best Advertising Stocks to Buy Now.
The online advertising market is expected to reach close to $1 trillion in value by the middle of this decade as the world goes digital. The COVID-19 pandemic has accelerated the digitization process by years, boosting the work-from-home culture, increasing trust in electronic payment methods, and forcing business owners to prioritize internet-based offerings. Digital advertising continues to account for more than half of the total money spent on marketing. According to Canadian technology firm Magna, digital ad revenues for 2020 were in excess of $500 billion.
Tech giants like Amazon.com, Inc. (NASDAQ: AMZN) are leading this growth. Amazon.com, Inc. (NASDAQ: AMZN) saw a massive jump in online sales during the pandemic that more than offset the advertising losses incurred as businesses remain shuttered for most of 2020. However, with the economy reopening, this revenue stream is expected to bring a significant amount of money for the firm this fiscal year. Amazon offers more value to advertisers as it can offer business owners access to the spending habits of consumers through its retail platform.
Even as Amazon makes inroads, a large chunk of the advertising business still remains in the hands of Facebook, Inc. (NASDAQ: FB), which owns popular platforms like Facebook, WhatsApp, and Instagram that are used by billions of users around the world. Facebook, Inc. (NASDAQ: FB) accounts for about 20% of the market share in the digital advertising industry. The company has raised prices in anticipation of a surge in business activity post-pandemic, and in the first quarter of 2021, reported a 48% increase in revenue driven by advertising gains.
However, the lion’s share of the internet-based marketing goes to Alphabet Inc. (NASDAQ: GOOG), the parent company of Google. Alphabet Inc. (NASDAQ: GOOG) controls more than 30% of the digital ad market, and has also raised prices in recent weeks to benefit from the reopening of the economy. The firm has posted sales of more than $50 billion in the first three months of 2021, up 34% from the same period last year as digital ad revenue shatters records even while the company is under scrutiny for its stranglehold on the marketing industry.
Most market projections for the advertising industry indicate significant upside potential for advertising companies in the post-pandemic economy. However, it is prudent to appreciate that the market has been volatile on technology stocks like Alphabet Inc. (NASDAQ: GOOG), Facebook, Inc. (NASDAQ: FB) and Amazon.com, Inc. (NASDAQ: AMZN) that dominate the advertising world. One of the most important lessons that 2020 has taught smart investors is that unforeseen events can decimate the ad marketplace in the blink of an eye. Even within the industry, competition for marketing seems to be heating up that will likely affect all those involved in it.
Technological innovation has not only disrupted the marketing industry but also affected others associated with it. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context in mind, here is our list of 10 best advertising stocks to buy now.
Best Advertising Stocks to Buy
10. The Interpublic Group of Companies, Inc. (NYSE: IPG)
Number of Hedge Fund Holders: 38
The Interpublic Group of Companies, Inc. (NYSE: IPG) is a New York-based advertising firm. It was founded in 1930 and is placed tenth on our list of 10 best advertising stocks to buy now. Some of the services offered by the firm include consumer advertising, digital marketing, communications planning, public relations, and data management. It also arranges meetings and events for select customers. Interpublic has a diverse portfolio with stakes in talent representation and healthcare as well.
On May 3, investment advisory Macquarie maintained an Outperform rating on The Interpublic Group of Companies, Inc. (NYSE: IPG) stock and boosted revenue estimates by close to 6% saying that fears about the tech sector disrupting the marketing business had subsided as growth in business increasingly required the services of specialists.
At the end of the fourth quarter of 2020, 38 hedge funds in the database of Insider Monkey held stakes worth $581 million in the firm, up from 31 the preceding quarter worth $486 million.
9. Clear Channel Outdoor Holdings, Inc. (NYSE: CCO)
Number of Hedge Fund Holders: 31
Clear Channel Outdoor Holdings, Inc. (NYSE: CCO) is a New York-based advertising firm founded in 1901. It is placed ninth on our list of 10 best advertising stocks to buy now. The firm has operations in Central America and Europe in addition to the United States. It offers marketing services on billboards, transit displays, street furniture displays, information kiosks, freestanding units, and other public places. The company owns and operates more than 500,000 advertising displays around the world, including more than 70,000 in the US.
Clear Channel Outdoor Holdings, Inc. (NYSE: CCO) reported a quarterly revenue of $541 million for the last three months of 2020, beating forecasts by $48.3 million. The firm said at the time that it expected to emerge stronger as the markets recovered from the pandemic.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Mason Capital Management is a leading shareholder in the firm with 29.6 million shares worth more than $48 million.
8. Magnite, Inc. (NASDAQ: MGNI)
Number of Hedge Fund Holders: 29
Magnite, Inc. (NASDAQ: MGNI) is a Los Angeles-based marketing company founded in 2007. It is ranked eighth on our list of 10 best advertising stocks to buy now. The firm offers advertising on desktop displays, video, audio, and mobile. The firm was formerly known as the Rubicon Project, which merged with Talaria in 2020 to form Magnite. The company has recently announced the completion of the $1.1 billion purchase of SpotX as it seeks to invest more in digital advertising amid shifting TV budgets.
Magnite, Inc. (NASDAQ: MGNI) stock gained close to 1.5% in February after the firm reported quarterly earnings for the last three months of 2020, posting $82 million in headline revenues, with both TV and online video revenues registering double digits increases.
At the end of the fourth quarter of 2020, 29 hedge funds in the database of Insider Monkey held stakes worth $361 million in the firm, up from 25 in the preceding quarter worth $143 million.
“Magnite, Inc. was among the top contributors to performance. Magnite is an advertising technology company serving as a supply side platform for publishers. The platform helps publishers such as network television stations or cable news providers automate the sale of digital advertising inventory across different formats and channels, like desktop, mobile, video, audio, connected TV and over-the-top TV. Publishers monetize their digital advertising inventory by using Magnite’s platform to access a global market of ad buyers, including advertising agencies that use supply side platforms. Magnite also helps sellers decrease costs and protect their brands and user experience.
Magnite receives ad inventory from sellers and optimizes publishers’ revenue yields by processing the highest buyer bids. Currently, Magnite keeps approximately 14% of ad spend as revenue (i.e. take rate) and passes on the remainder of the ad spend to publishers. Magnite’s clients include many of the world’s leading publishers of websites and mobile applications and the company believes that its platform reaches approximately 1 billion individuals globally. Shares of Magnite outperformed in the first quarter due to stronger-than-expected fourth quarter results driven by a rapid recovery in digital advertising. Additionally, the company acquired SpotX, its largest competitor in connected TV. The combination makes Magnite the industry’s largest independent supply side platform and a much larger connected TV player. We believe connected TV is the most exciting part of the digital ad market and is in the early days of growth, including capturing market share from linear TV.”
7. Groupon, Inc. (NASDAQ: GRPN)
Number of Hedge Fund Holders: 26
Groupon, Inc. (NASDAQ: GRPN) is a Chicago-based e-commerce firm founded in 2008. It is ranked seventh on our list of 10 best advertising stocks to buy now. It connects consumers to different merchants through a website and mobile application. The company operates in more than 500 cities in 48 countries and has more than 48 million active users. It sells advertising space on its platforms to different businesses. It has a market cap of over $1.5 billion and posted more than $1.4 billion in annual revenue in 2020.
On May 1, investment bank JP Morgan upgraded Groupon, Inc. (NASDAQ: GRPN) stock to Neutral from Underweight after the company posted strong quarterly results with a gross profit of $179 million. It assigned the stock a $48 price target.
Out of the hedge funds being tracked by Insider Monkey, California-based investment firm MIG Capital is a leading shareholder in the firm with 1.5 million shares worth more than $60 million.
6. Omnicom Group Inc. (NYSE: OMC)
Number of Hedge Fund Holders: 34
Omnicom Group Inc. (NYSE: OMC) is a New York-based media, marketing, and communications firm. It was founded in 1986 and is placed sixth on our list of 10 best advertising stocks to buy now. It is one of the largest marketing companies in terms of market capitalization in the US. Omnicom offers advertising, branding, content marketing, corporate social responsibility consulting, crisis communications, custom publishing, and data analytics services. It has operations in several European, Asian and South American countries. For those who want to invest in advertising stocks other than the obvious and expensive names like Alphabet Inc. (NASDAQ: GOOG), Facebook, Inc. (NASDAQ: FB) and Amazon.com, Inc. (NASDAQ: AMZN), OMC is a sound option.
On April 19, Omnicom Group Inc. (NYSE: OMC) announced that it had acquired a stake in digital solutions company Areteans to extend depth in digital transformation, marketing, and ecommerce capabilities. A day later, the firm posted quarterly results for the first three months of 2021, reporting a revenue of $3.4 billion, beating market estimates by $130 million.
At the end of the fourth quarter of 2020, 34 hedge funds in the database of Insider Monkey held stakes worth $546 million in the firm, the same as in the previous quarter worth $528 million.
“Omnicom. We sold Omnicom in January on the acknowledgment that it would not outgrow GDP like we had posited in our investment thesis criteria.”
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Disclosure: None. 10 Best Advertising Stocks to Buy Now is originally published on Insider Monkey.