With the World Cup upon us, Wimbledon on the horizon and some big matches in cricket and rugby dotted throughout the summer, anyone who doesn’t have a passion for sport might find the next few months hard to stomach. For some, though, sports are a way of life – but is it possible to turn this hobby into successful investment?
The World Cup
Millions will place bets on the outcome of Brazil 2014, but there are more sophisticated ways of benefitting if your chosen country succeeds. In Britain, countless companies will see some good business during the tournament, from pubs to major airlines to sports shops.
For pub companies and retailers like Sports Direct and JD Sports, a longer stay in the competition from England brings more profit, as more people flock to pubs and England-fever drives the sales of England shirts, flags and other paraphernalia. If you believe that England may exceed expectations, beat Uruguay and Costa Rica, and make an impact on this year’s tournament, some shares in Wetherspoons may be a shrewder buy than a wearable England flag.
Of course, England’s chances of getting anywhere near the final are slim, so many are placing their faith in other countries. Spain’s financial markets rallied during and after their successful campaign last year, in a continuation of a pattern that has occurred for the last few tournaments: the winner’s stock market tends to see a fillip (as do the runners up, to a lesser extent).
So if you have a favourite team for the final, you can look to their stock market instead of the bookies. The other country who traditionally sees a rally during the tournament is the host – so with Brazil amongst the favourites this year, the Ibovespa index may make for an interesting investment.
But the World Cup only comes once every four years, so those looking for more regular returns may seek a more direct investment in their favourite sports venture. Chances for direct investment in sports teams are rare, but some fans may be in luck.
Manchester United are probably the highest profile team to have a stock market listing, and anyone who predicted the misfortunes the team was going to go through after the retirement of Alex Ferguson could have made some astute predictions on their market price. The high watermark achieved as Manchester United won the Premiership in 2013 has not been reached since – but if you believe Van Gaal can turn the team around, Manchester’s stock is an alternative way to back up your belief.
Fans of Celtic, AS Roma, Juventus or Borussia Dortmund can also all invest in their respective teams, but beyond them chances are limited. Those with an interest in American sports can invest in the New York Nicks Basketball team via Madison Square Garden, though.
The nature of F1 may seem to make it a better target for investment, as major motoring companies tend to own teams. But the withdrawal of BMW from racing means that just three of the teams racing this year can be used for investment – Ferrari (via their parent company Fiat) and Mercedes (via Daimler), and Williams (directly, after their IPO in 2011).
If you don’t mind being one or two steps removed from your current team, you can invest via their owner or major sponsor: but the impact that a team or individual’s success has on their owner or sponsor’s stock value varies widely.
Nike’s involvement in several sports makes any direct impact from a particular team or event hard to assess, whereas the impact that Novak Djokovic has on his main sponsor – Uniqlo – is more direct. In football, the clear relationship between Sports Direct and Newcastle United means that the football team’s performance can affect stock price. But even then, major events outside of Newcastle United’s influence will have more importance as investors pay more attention to the parent company than the sports team they own.
As such, investing in a team or sportsman via their owner or sponsor can be a great way of owning a part of something that you care deeply about – but probably isn’t best way of turning a passion for sport into investment returns. There are opportunities however, through major events and by keeping an eye out for what’s available, to use some knowledge from the world of sport for forays into investment.
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Author’s bio: This article was written by Patrick Foot, financial markets writer at IG – a leading provider of spread betting and CFD trading. Learn more about CFD trading with IG.