Quantfury Gazette
Opportunities abound to play the sports investment game
If you’re someone who enjoys playing or watching sports, have you ever thought about how you might invest in your passion?
There are a few ways you might approach it. Perhaps the simplest investment vehicle is stocks.
Most major teams in the US and Europe aren’t publicly traded. But there are a few, such as legendary UK football club Manchester United (NYSE: MANU) and the Atlanta Braves US baseball team (NASDAQ: BATRA).
Team stocks can be dicey, because some teams are more focused on spending to win (often unsuccessfully) than they are on profits. But there are stocks that have performed well.
Manchester United has returned negative 0.5% annualized over the past three years, according to Morningstar. The team has reported serious losses and has racked up a 547 million-pound ($711 million debt).
But the Braves have returned 11.8% annualized during the last three years, topping the S&P 500’s return of 9.9%. The Braves have benefited from strong on-field performance and the growing wealth in Atlanta.
Other options for sports investing
Outside of teams, if you’re a fan of auto racing, you can invest in Liberty Formula One Group (NASDAQ: FWONK). It has an annualized return of 13.2% over the last three years, as the sport has soared in popularity.
You can also buy shares in a number of sports apparel and shoe companies, such as Nike (NYSE: NKE) and Adidas (CBOE: ADS) Both companies have led the industry for decades, but have gone through ebbs and flows.
Nike’s stock has produced an annualized return of negative 20.4% over the past three years amid several failed management moves. That included trying to bypass its retail partners in selling directly to consumers. But with a new CEO, Nike may rebound.
Adidas shares have returned negative 10.7% annualized over the past three years. But they have rebounded 32.2% over the past 12 months, as shoes such as the Samba have proven popular.
If you happen to use a sporting goods company’s products, that can give you a leg up in deciding whether to purchase the stock. This fits with legendary fund manager Peter Lynch’s philosophy of buying what you know.
Of course, don’t buy a stock just because you like the company’s tennis shorts. Do your research to make sure it has strong financial performance or at least the potential for that.
The arena for private sports investing
There also are private investment opportunities if you’re interested in getting into sports. In the recent past, only multi-billionaires could buy teams.
That includes the Glazer family, diversified investors who control Manchester United and the NFL’s Tampa Bay Buccaneers, and former Microsoft CEO Steve Ballmer, who owns the NBA’s Los Angeles Clippers.
But now all the major US leagues have opened up for private equity investors. So you may be able to get a piece of a team for as little as $1 million. For most of us, that’s still a lot of money.
However, you can get a piece of a minor league team for a lot less. In lower level minor leagues, 100% team stakes can sell for less than $1 million.
Thus if you pooled resources with your friends or others, you could easily own a stake in a soccer/football team for well under $100,000. Some U.S. minor league baseball teams, which cost around $1 million to $50 million, have more than 100 owners.
But keep in mind that owning a team can involve a lot more than sitting in your free seats to watch games. Owners have to deal with everything from player salaries to stadium costs. In lower level leagues, teams can easily fail and sometimes entire leagues go under.
So don’t invest more money in a team than you can afford to lose – a good rule for any speculative investment.
But obviously investing in a company like Nike or Adidas carries less risk, meaning sports fanatics can invest in their passion anywhere along the risk curve. Like a basketball point guard, you have options.
The author owns shares of Nike.
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