It's no coincidence that James Bond drove a BMW Z8 in "The World Is Not Enough", or that most of the robots in the 2007 "Transformers" movie transformed into GM vehicles. Product placement, like the traditional advertisements that come before movies and during commercial breaks of television shows, helps offset the costs of production, allowing consumers to watch the content without having to pay the "full price" of what the content actually costs. The latest product friendly production grabbing attention is the "Sex and the City" movie.

This type of advertising has been around since the 1950s, but it is definitely becoming more prominent in modern movies today. In a consumer-based economy this promotion goes for big money. Research company PQ media estimates product placements across all media were worth $2.21 billion in 2005. With investments and returns this high, product placement advertising is as big a business as ever. (Memorable advertising is a brick in the fortress that keeps competitors at bay; for more information, read Advertising, Crocodiles And Moats.)

Selling in the City
Since it began airing on HBO in 1998, "Sex and the City" has made designers like Louis Vuitton, Manolo Blahnik, and Vera Wang names known by almost every woman in the television-watching world. With this in mind, there is no surprise that the movie is pretty much one big advertisement. A New Line Cinema executive coined the phrase "Super Bowl for women," referring to the large percentage of the population that look forward to the Super Bowl's advertisements, as much as the football itself. Many products and services are seen on screen in the new Sex and the City movie, and if not, they were clearly plugged in the four urban women's dialog. From this list of products and services, we have created a list of 12 publicly traded companies and dubbed it the Sex and the City Index.

The Sex and the City Index

Company Product/Service Featured and How 52 week loss/gain*
Nike plugged throughout movie, also Nike shoes given to actors at casting party. 17.3%
Tiffany & Co.
Carrie\'s wedding gifts -8.03%
Nasdaq:BFLY (Plug) -64.2%
Nasdaq:NFLX (Plug) 43.8%
Carrie\'s computer and Samantha\'s iPhone 53.4%
Research In Motion
Miranda\'s Blackberry 144.9%
Miranda and Big\'s computer -16.6%
Sprint Nextel NYSE:S Carrie\'s service provider -59.6%
All four visit it repeatedly -37.8%
Samantha flies on American Airlines, also ad seen in her office -74.2%
Daimler AG
Big\'s chauffeur drives a Mercedes-Benz -17.4%
News Corp.
Carrie writes for the New York Post, The Wall Street Journal is Big\'s bedtime reading -23.5%
Capitalization-Weighted Index Results: 31.83%
*Data as of market close June 3, 2008

Over the same time period, the S&P 500 had a 52-week return of -9.8%, so as you can see the comparison is pretty cut and dried. If you had invested in the products showcased in the Sex and the City movie over the past year, in weightings based on market capitalization, you would have beat the market by about 40%. (For further reading, be sure to see our related article Market Capitalization Defined.)

Even if you had simply invested an equal amount of money into each of these stocks, you would have beet the market by about 6% with a loss of only 3.5%. So why has this happened?

Hot Technology Carries the Index
Apple, Research In Motion (RIM) and Netflix all saw outstanding results over the past year, giving investors returns of 53.4%, 144.9%, and 43.8% respectively. When you look at the market capitalization of these stocks, you see Apple and RIM are leading the pack as well. With market caps of over $163 billion, and $75 billion respectively, just these two companies make up over 50% of our capitalization weighted index. So, what would happen if we took out these two winners? The Sex and the City Index sans Apple and RIM would give a loss of 19%, over 9% worse than the market. But if you took everything else out of the index, you would have seen gains of over 83% on your invested capital!

Bottom Line

What we see in this situation is important to note. Can we just invest blindly in companies that we see plugged in hot new movies? Maybe... It's possible extra attention that these products get over the next month or so, will give all 12 positive returns when compared to the market. But we'd be smarter using this index as a starting point, and then researching which companies to invest in from there. All of these companies have the potential to do well over the next year, mainly because they are large, well-known companies providing valuable products and services, and because of the extra exposure from a big movie such as this. But from here on in, it could be well worth the trouble of searching for a diamond in the rough. (Find out the difference between a company capable of surviving a share-price beating and one that cannot, in Finding Profit In Troubled Stocks.)

Add Your Two Cents
What do you think will happen with the stocks in the Sex and the City Index going forward? Could one of the companies that has seen a large decline, like Sprint Nextel or Bluefly, bounce back to be the next big winners in the upcoming year? Be sure to join me (aytonmm) in the FREE Stock Picking Community to share your thoughts and see what other investors are saying.

Related Articles
  1. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  2. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  3. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  4. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  5. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  6. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  7. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  8. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  9. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  10. Investing News

    Corporate Bonds or Stocks: Which is Better Now?

    With market volatility high, you may think it is time to run for corporate bonds instead of stocks. Before you do take a deeper look into which is better.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!