October 2000 - U.S. Hispanics are expected to number 66 million by 2030, a fact not lost on the denizens of Wall Street. Wherever there's money to be made, you can count on Wall Street to find it and, in the case of full-service brokers, to recommend market sectors or particular stocks to clients.
Marshall Acuff Jr., a chartered financial analyst for Salomon Smith Barney, spoke with HISPANIC BUSINESS recently about an equity strategy paper produced by his firm outlining potential opportunities in the Hispanic broadcasting industry.
With special emphasis on TV broadcaster Univision and radio broadcaster Hispanic Broadcasting, the findings bode well for niche broadcasters.
HB: What led you to do this research?
MA: The growth in the Hispanic population is one variable. Clearly it's projected to be a very large growth area in the population of the United States for many years to come – and consequently for the long-term investor. It would therefore seem logical that we should try to identify some of the opportunities to benefit from that substantial growth. The most visible opportunities are the communications companies that are targeting the Hispanic community.
HB: The equity strategy paper produced by Salomon Smith Barney states that you believe the future is bright for broadcasting companies that focus on the Hispanic population. Can you explain how you arrived at that conclusion?
MA: I think the conclusion really plays off the point I just made. We looked at a cohort in population that is likely to outstrip other cohorts in the next 10 or 20 or more years. Then the question becomes 'Can you identify companies that might benefit from that?' That's all it boils down to.
HB: Other ethnic minorities eventually were assimilated into the mainstream U.S. population, giving up native languages and much of their culture in the process. Will the same thing happen to the Hispanic population, and how will that assimilation (or lack thereof) affect Hispanic radio and TV broadcasters?
MA: From what we know today, it appears that the Hispanic population is maintaining a greater sense of its own identity over time than has historically been the case among other ethnic minorities, although we can't say what it will be like 20 years from now or 50 years from now. That identity is very strong, which in turn presents the business community with opportunities. The African-American population also represents a continuing opportunity. Within the communications arena, Black Entertainment Network is an example. It's not terribly unusual to see an opportunity like this that might be segmented.
HB: You've highlighted two companies in particular as businesses whose growth potential sets them above the rest – Univision and Hispanic Broadcasting. Can you explain what makes these companies stand out?
MA: I believe there are three companies, maybe even four, but those are the two we have fundamental coverage on. As a matter of policy, we don't recommend companies that we do not have fundamental research coverage on. Univision is probably the larger, more established company at this point. I'm not taking anything away from Hispanic Broadcasting. Investors many times want to focus more on companies that have that great sense of strength. We're focusing more on the national markets than on the Florida market or the Southwest market. [Their national coverage area is] really the key difference between these two companies [and other companies]. Univision is probably a bit more established over time.
HB: Do these factors make Univision and Hispanic Broadcasting good long-term investments – say, over the next 20 years?
MA: Exactly. That's really what I'm interested in. This is not for day-traders or someone focusing on the next year. To capitalize on these opportunities, you have to be a long-term investor. Not necessarily over a 20-year period, but the next five to 10 years. That observation takes on relatively more meaning given the fact that these stocks are not cheap. For investors to capitalize, they have to be in it for the long term and capitalize on the profit growth these companies will produce. We're reinforcing what the market has already seen, but also we have a conviction, based on the demographic outlook, that in years ahead these companies will thrive.
HB: Do you see any strong competitors to Univision's and Hispanic Broadcasting's dominance?
MA: Not really. The competitors would be larger companies that might enter this market. But I think once you get established and get some recognition – Univision being a good example – then it's harder for NBC or CBS or whoever to come in.
-- by Scott Williams
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