Are out of home stocks more volatile than the market?  The best way to answer that is to compute a stock’s beta which measures the stock’s volatility in relation to the overall market.  For you math geeks beta is the covariance of the return of an asset with the benchmark divided by the variance of the return of the benchmark over a certain period.   The S&P market as a whole has a beta of 1.0.  A stock with a beta above 1.0 is more volatile than the market.  A stock with a beta below 1.0 is less risky than the market.  Here are the betas for the public out of home companies:

Clear Channel Outdoor.         2.48

OUTFRONT.         1.74

Lamar Advertising.         1.38

• Clear Channel Outdoor, OUTFRONT and Lamar are more volatile than the market.   This is so for two reasons.  Clear Channel Outdoor, OUTFRONT and Lamar have more debt than a typical S&P 500 company; and their ad-based businesses are more sensitive to recession.
• Clear Channel Outdoor has a beta of 2.48, meaning that for every 1% change in the S&P 500, Clear Channel Outdoor will move 2.48%.   Clear Channel has the highest beta in the out of home industry because it has the highest debt.  Debt means more risk which heightens a stocks sensitivity to good or bad news.
• OUTFRONT has a beta of 1.74 which means that it will change by 1.7% for every change in the S&P 500.  OUTFRONT’s leverage is less than Clear Channel and more than Lamar so you would expect it’s volatility to be the same.
• Lamar has a beta of 1.38 which means that it will change by 1.38% for every 1% change in the S&P 500.  Lamar has the lowest leverage and the greatest reliance on more stable roadside billboards so you would expect it to have the lowest beta in the out of home business.  It also pays the highest dividend which reduces volatility because investors are able to take some of their winnings off the table each quarter.  A stock with no dividends is like a zero coupon bond and zero coupon bonds will always be more volatile than bonds which pay interest.

Billboard Insider’s take:  Out of home stocks will be more volatile than the stock market as a whole because of higher debt levels and exposure to cyclical advertising.  This means they will  outperform the stock market during good times and underperform the stock market during bad times.  They can be a good investment but you need to have the patience to ride out bad news and bear markets.  Clear Channel is the most volatile, meaning it will go up or down the most on good or bad news.  Lamar Advertising is the least volatile.  It will go up or down the least on good or bad news.

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