We all have ideas on what we want to do in retirement. For some, it is just the luxury of not having to wake up in the morning and head into an office to work. For others, it is a time to finally achieve some long-held dreams – travelling with loved ones, spending quality time with family, even getting better at golf! All are valid choices.
Whatever you want to do in retirement, one thing that is for sure is that you will need money to fund your plans. Having a healthy bank account and investment pot will enable you to not only enjoy retirement more, but also to retire earlier.
Therefore, it is always a good time to look at potential ideas for what could be a good investment buy. Take a look at ITV (LSE: ITV).
What is the story?
ITV is a media business, split into two main arms. The first is ITV Studios, which helps to produce programmes. Second is ITV Broadcast, which is the network side of things.
ITV makes most revenue from advertising slots, either on TV or from online viewing. The shift towards digital in the UK has not harmed ITV unduly; the company noted in last year’s results that VOD (video on demand) revenue was up 36%. This reflects both the consumer trend away from watching TV, but also that ITV is aware of the trend.
Why would I invest?
For a start, the business model that ITV runs is tried and tested. You may not see double-digit profit growth year on year, but the business is fundamentally solid for the long run. This is because advertising via media companies is still a vital way for firms to get their message out to the consumer.
Different sectors may perform differently and adjust advertising budgets accordingly, but overall the net difference is minimal. For example, last year the travel industry shrunk spending with ITV by 8%. However, the telecommunications industry increased spending by 18%. I think this future-proofs ITV as a whole.
The share price has struggled this year, which some have put down to Brexit. External revenue dropped by 7% in the first half of 2019, reflecting the uncertainty of potential operations and trading with partners outside of the UK.
Myself, I feel that recent events give rise to the potential of a deal between the UK and the EU, and if this happens, then ITV’s performance could get a boost.
What should I watch out for?
Well, if you think Brexit is going to go horribly wrong, then I would suggest avoiding the stock. It has international operations but is fundamentally a UK business, and so will be affected by political events.
Further, if you believe we are heading into a recession, then firms across the board will cut advertising spending to save on costs, which would hamper the profits of ITV as a result of lost revenue.
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Jonathan Smith does not own shares in ITV. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.