**I ultimately deleted last weeks blog for a few reasons. If you are interested in receiving it, send me a note and I can send it to you separately, onward and upward..**
Getting involved with sports ownership has typically been limited to the ultra wealthy.
Steve Ballmer, owner of the Clippers, was the CEO of Microsoft from 2000 - 2014.
Dan Gilbert, owner of the Cavaliers, founded Rocket Mortgage.
Mark Cuban, David Tepper, The Walton Family; the list goes on.
Owning a sport’s team is the ultimate ego stroker.
But why else would someone consider investing in this asset class?
For starters, the returns have far outpaced those of the S&P 500:
According to Tony Robbins’ new book, “The Holy Grail of Investing”, (read with a grain of salt please) and CAZ Investments:
Between 2012 and 2022, the S&P 500 returned approximately 11% annually. The Russell 2000 (an index comprised of small cap stocks) returned 8% annually. Over the same period, the big four leagues (NBA, MLB, NFL, and NHL) combined for 18% percent compounded returns. Between 2002 and 2021, the average price for an NBA team rose 1057%. By comparison, the S&P 500 returned a total of 458% percent over that period.
This outperformance compared to the S&P 500 provides a significant opportunity for investors.
Not to mention the performance of pro sports teams typically has little correlation with the public markets.
Even during economic downturns or recessions, the love for sports remains steadfast.
Sports are a global phenomenon as well. The NFL, NBA, and NHL have expanded their reach by playing games overseas, tapping into new markets and audiences.
The great thing about sports is that it tends to bring people together, although Bill Burr does a hilarious job explaining how we let sports ruin our lives.
Sports tend to dominate the TV Ratings. We just witnessed the Women’s College Basketball Championship drew a record breaking 18.9 million viewers. This was the most-watched basketball game, at any level, since 2019.
But it’s not just about investing in a team because you like and root for them. It involves understanding their income stream and the assets they own.
Many teams own the real estate alongside the stadiums and surrounding properties. Other income sources include league revenue shares, media partnerships, ticket sales, merchandise, sponsorships, luxury boxes, and the newest trend of partnering with the gambling industry (what could go wrong??)
This can be a very attractive opportunity for investors.
But for those who aren’t at that level just yet, the public markets offer a few options.
Companies like Atlanta Braves Holdings (BATRK), which owns the Atlanta Braves and some associated real estate holdings. Madison Square Garden Sports Corporation (MSGS), owns the New York Knicks and the New York Rangers. Manchester United (MANU) owns Manchester United as well as broadcasting rights and other related businesses.
However, investing in sports through public markets can be tricky.
For instance, let’s look at Madison Square Garden Sports Corporation (MSGS), which owns the Knicks and Rangers.
The value of the New York Knicks is supposedly around $6.6 billion. And the New York Rangers may be worth around $2.65 billion.
But the current market cap for MSGS stands at around $4.4 billion. So you are telling me the value of the sports teams MSGS owns is over $9 billion, but the stock itself is only worth $4.4 billion??!
Buy, buy, buy…
But here’s the catch. Those valuations of the Knicks and Rangers are meaningless unless James Dolan actually sells them, which he is unlikely to do.
So as a shareholder, this can be frustrating. You think you are outsmarting the market, “I found a loophole!!”, but in reality, this has been the same story for a decade…
This theme is similar across private equity and other alternatives. It sounds great, but typically you are locking up money for a prolonged period of time or waiting for a big exit.
More leagues are now open to allowing private equity firms to purchase minority stakes in teams. That’s why our boy Tom Brady just purchased around 10% of the Raiders. He understands the power of being an owner.
But most of us would be told to pound sand if we tried to get in on these offerings.
So it’s not impossible for you to gain ownership in the sports world. But you certainly want to know the intricacies of income streams, asset valuations, and how you ultimately can get your money out.
Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.
All indices are unmanaged and may not be invested into directly.
All investing includes risks, including fluctuating prices and loss of principal.