The Olympics proved pure gold for the companies sponsoring the games – as shares have been on a winning streak since the start of the year. According to Morningstar data, sponsoring the most renowned sporting tournament in the world does not only raise a company’s profile, it also helps send the stocks higher.
Among the 10 worldwide sponsorship partners and 10 official sponsorship partners with the British Olympic Association, five companies stood out; BP (BP.), General Electric (GE), Procter & Gamble (PG), Samsung (005930) and Visa (V).
Energy Stocks Rise with Oil
BP is up 23% year to date, helped by oil prices rallying almost 30% over the same period. The stock is rated with a two-star rating, meaning analysts think the stock is currently trading higher than its value.
Morningstar analyst Stephen Simko thinks that oil prices won't recover to $100 per barrel anytime soon, and he doesn't believe BP's assets are cost-advantaged enough to provide it with a lasting competitive advantage. BP’s dividend looks safe only if oil prices recover to $65 or higher longer time.
Despite BP’s plans to lower capital spending and delay higher-cost projects, Simko believes the recent trend of low returns on capital is likely to continue for the foreseeable future.
General Electric is up slightly 0.3% year to date. The shares are currently fairly valued according to Morningstar analysts. Energy is a key part of the business, but has been badly impacted by the weak oil price over the past two years. The rest of the year may prove more positive for the stock thanks to the healthcare and aviation parts of the business.
Consumer Stocks, Financials and Tech
Shares of Procter & Gamble, the consumer goods manufacturer gains 10% year to date. It is rated by Morningstar analysts as a four-star stock, meaning they consider the stock to be undervalued. The company has paid a dividend to its shareholders consistently for more than 120 years, and Morningstar analysts forecast mid- to high-single-digit dividend increases over the next 10 years.
Visa, the digital payment management firm, has gained 4.2% year to date. The company was also a sponsor in London Olympics in 2012 and has seen gains of 149% since then. Visa is in excellent financial health and it is highly profitable due to its dominance in electronic payments in the market, according to Morningstar equity analyst Jim Sinegal. Morningstar analysts consider Visa to be undervalued at its current share price.
Samsung Electronics has rallied 31% year to date, and the most recent results reveal a positive three months for sales and profit. Samsung has been a fantastic growth story as it established itself as the clear global leader in the smartphone space during the past six years, but despite these strengths, challenges loom. Unlike competitor Apple, Samsung Electronics doesn't benefit from an economic moat. Competition in the smartphone space has been intensifying during the past three years. Chinese smartphone manufacturers have emerged, offering similar products at very low margins, which have proven quite popular in China.
Tokyo 2020: Olympic Stocks to Watch
Japan released the sponsors for the 2020 Olympics in Toyko, and General Electric, Procter & Gamble, Samsung and Visa return to the list. New faces include Cisco Systems (CSCO) and Canon (7751).
Cisco Systems, the supplier of data networking software, remains a dominant force in data networking services. The company has gained 14% year to date. It has a two-star rating from Morningstar analysts.
The acceleration of the internet of things phenomenon puts Cisco in a position of strength given its broad product line-up, Morningstar analyst Ilya Kundozerov said. Cisco is expected to continue to grow its wireless, security, and UCS segments at a double-digit rate.
Canon, the electronic equipment manufacturer, has seen its share price fall 21.4% year to date. Owing to significant appreciation of the Japanese yen and weak demand in both laser printers and cameras, the company has seen revenue declined for its second quarter, Morningstar analyst Allen Cheng said. However, as Canon diversifies its operations away from the current Japan-centric model, it will benefit from global influences on research and development, closer ties to international customers, and greater protection from fluctuations in the yen, Cheng added.
