Investing in Your Backyard: San Antonio

There are many good reasons to research investment opportunities in a certain geographic area. Today, we're trailing Simon Cowell and company through San Antonio, Texas, where American Idol hopefuls broke into tears at the slightest provocation. When we move from the audition stage to the business district, will we find Texas Tea sloshing around our feet, or might there be more to cry about?

San Antonio is the largest American city without a big-time pro or college football program, the seventh-largest town in the nation by population, but only the 37th media market. What gives?

If you happen to live in Alamo Heights or the King William district, you already have a few advantages when it comes to evaluating the local market: access to local news sources, the word on the street, and the high probability that you're already a customer or employee of these companies. If you're not a local resident, you might still want to know whether the city's business aptitude matches its prospective pop talent. In both senses, the Alamo City could be chock-full of undiscovered treasures on their way to greatness.

Without further ado, here are the largest companies headquartered in San Antonio, and their ratings in our Motley Fool CAPS community intelligence service:

Ma Bell's gone to Texas
That chart's got at least one of every conceivable CAPS rating -- except a five-star firm. Don't worry, we'll get to those later.

San Antonio-based SBC, which took the AT&T name after its 2005 merger, has investors sitting on the fence. All-star CAPS player verylargelarrylikes the company's business:

"Tech will change telephony. But phone companies continue to send out billings every month, those billings are increasing, they are cash, and they will fund future growth in whatever form it takes. Follow the money flows. Like Qwest, T is a winner."

But TMFBreakerJava retorts thusly:

"I turned bearish on the telecoms which I held profitably for many years, when someone pointed out that wireless Internet was a threat not just to fixed line revenue but even to cellular revenue, which is where they are getting all of their growth. Once VOIP, available for free through Skype, is combined with WiFi and son of WiFi, and the Internet becomes truly all-pervasive, why would anyone pay for phone service?"

Black gold
Valero is the largest of a bucketful of energy operations in San Antonio. Our CAPS community likes most of them, and the big-time refining specialist is no exception. Our own Bill Mann (TMFOtter in CAPS) can explain why:

"Whatever else might happen during the oil crisis, our government will completely fail to find a way to make it easier for more refineries to get sited. There isn't a single refinery in Florida. Does that seem like a good or a bad thing? Well, for companies like Valero, that seems pretty good."

The same sentiments describe Tesoro, as well. Scanning the pitches for that stock, you'll see the words "sector," "momentum," and "shortage of refineries" pop up more than once.

Double the displeasure
Then there's the dynamic Clear Channel duo, which gets very little love from our players. Those who rate the mainstream media operation "outperform" seem to like company's buyout potential, and there is a private equity bid on the table. However, it's also true that a couple of the company's largest shareholders oppose the deal, so it's hardly a San Antonio Spurs-style slam dunk. CAPS player NetscribeMedia sees trouble brewing here:

"In November (Clear Channel Communications) was acquired by Bain Capital Partners for $37.60 per share which offers a very low premium to the shareholders. It has to be noted that the company has lost around 60% of its market value since 2000 which makes this acquisition look even more ominous. Nothing concrete has been announced in terms of a clear strategy to indicate that the company will beat the tough market conditions and competition in 2007."

Digging in the dirt
That's it for the big caps in town. But below them, you'll find 14 other publicly traded companies -- six of which are five-star CAPS stocks. That bunch includes a regional bank, an insurance company, an advertising firm, and three energy plays, including Valero offshoot Valero LP (NYSE:VLI), which specializes in transportating all that precious oil and gas.

It's pretty clear that oil is the lifeblood of the publicly traded San Antonio economy. It's just too bad that you can't buy stock in military bases, or this place would be a gold mine. The city's economic planning division says that the U.S. military employs more than 85,000 people in town, contributing $5.2 billion to the local economy each year. As if that weren't enough, the government is moving even more Army operations into town over the next few years.

City officials are also mighty proud of the new Toyota (NYSE:TM) plant in town, and often hold it up as validation of the city's economic growth plans. Local government also aims to pull in increased investments in a few specific industries, including biotech, aerospace, and telecommunications. (The energy sector is notable in its absence from that list.)

Unlike its northerly neighbor Austin, San Antonio isn't much of an IPO hotbed. Not one of the 19 tickered companies in town went public in the last decade.

So in San Antonio, there's a lot of five-star talent, but little in the way of exciting growth. Overall, it's a fine showing -- you can stop crying now, Idol contestants. But it's a far cry from the excellence in Seattle, or Minnesota, or even Austin.

Do you agree? Disagree? Feel free to weigh in on the Riverwalk market -- or any stocks at all, really -- by joining Motley Fool CAPS and blasting away with your ratings and commentary pitches. And if San Antonio isn't your 'hood, maybe we'll come around where you live the next time.

Further Foolishness:

• Toyota's Winning Race to the Bottom
• Clear Channel Frosts Fidelity
• The Best Place to Make Money

AT&T was a former Motley Fool Stock Advisor pick. Want to know which companies still make David and Tom Gardner's list of superior stock selections? Get the whole enchilada with a free 30-day trial.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, but his wife does drive a Toyota. You can check out Anders' holdings if you like. Foolish disclosure is hotter than fresh pico de gallo.