Can in­vestors en­joy a World Cup boost?

We ex­am­ine the po­ten­tial win­ners and losers as kick-off ap­proaches

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On 14 June at 4pm UK time at the Luzh­niki Sta­dium in Moscow the 21st foot­ball World Cup kicks off as the host na­tion Rus­sia takes on Saudi Ara­bia. As well as foot­ball fans, sev­eral stock mar­ket names will be watch­ing the tour­na­ment closely to see if they will en­joy a World Cup-re­lated boost to their trad­ing.

If his­tory is any guide then pubs will be busier, some re­tail­ers should ben­e­fit from in­creased de­mand, book­ies will be tak­ing more bets while broad­cast­ers and advertising firms could also do well.

BUYING THE SHIRT

Specif­i­cally, in­vestors in sports­wear re­tail­ers

Sports Di­rect (SPD) and JD Sports Fash­ion (JD.) may ex­pect to see a spike in sales from Eng­land replica shirts and other World Cup mer­chan­dise. While Dixons Car­phone (DC.) could see some tan­gen­tial ben­e­fit as house­holds splash out on new TVs to watch the ac­tion.

For those watch­ing at home, a take­away may be a pop­u­lar op­tion. The pre­vi­ous World Cup in Brazil in 2014 helped Domino’s Pizza (DOM) de­liver a 10.1% in­crease in first half profit.

An­other big spend will be on food and drink for those host­ing par­ties as the tour­na­ment pro­gresses, which could move su­per­mar­kets such as Sains­bury (SBRY), Mor­ri­son (MRW) and Tesco (TSCO) into fo­cus. WATCH­ING AT THE PUB

Not ev­ery­one will stay at home to watch the games, with lots of us head­ing to the pub with friends and fam­ily.

Our key World Cup se­lec­tion is Marston’s (MARS) whose shares are look­ing at­trac­tive at cur­rent lev­els re­gard­less of any im­pact from the foot­ball. They look even tastier when you con­sider the foot­ball event could pro­vide a boost to trad­ing.

While book­mak­ers are ex­pected to take an in­creased vol­ume of bets, the for­tunes of the likes of GVC (GVC), Wil­liam Hill (WMH) and Paddy Power Bet­fair (PPB) will likely de­pend on the out­come and whether the favourites pre­vail – typ­i­cally this would see them lose out.

Free-to-air broad­caster ITV (ITV) is set to show up­wards of 30 matches in­clud­ing Eng­land’s tus­sle with Bel­gium on 28 June.

It al­layed fears that the tour­na­ment would be a damp squib in a 10 May up­date. Me­dia buy­ers had been feed­ing back to the an­a­lyst com­mu­nity that the mar­ket might only be up by sin­gle dig­its year-on-year. How­ever, ITV guided for na­tional advertising revenue to be up by 15% in June. In­creased advertising spend could also be good news for advertising agen­cies like WPP (WPP).

IS IT AL­READY PRICED IN?

A key ques­tion in­vestors need to con­sider is whether all of this has al­ready been priced in by the mar­ket. Rus­sia was awarded this World Cup in De­cem­ber 2010 so there has been plenty of time to think about who the win­ners and losers might be and to fac­tor this in to equity val­u­a­tions.

The key un­cer­tainty which could catch the mar­ket off guard and pro­vide op­por­tu­ni­ties for in­vestors is if the Eng­land foot­ball team en­joys a strong run in the tour­na­ment. Re­search com­mis­sioned by dis­count deals com­pany VoucherCodes.co.uk sug­gests a £1.33bn boost to the do­mes­tic econ­omy if Eng­land makes it to the sec­ond round.

And if the Three Lions made it all the way to the final this would dou­ble to £2.72bn. How­ever, Eng­land’s poor record in re­cent tour­na­ments and their sta­tus as 16-1 out­siders sug­gests in­vestors should not set too much store by this hap­pen­ing.

“The pre­vi­ous World Cup in Brazil in 2014 helped Domino’s Pizza de­liver a 10.1% in­crease in first half profit ”

Based on the tour­na­ments so far in the 21st Cen­tury and com­par­ing the per­for­mance of stocks in the host na­tion to a se­ries of other ma­jor mar­kets the ev­i­dence is in­con­clu­sive on whether there is a World Cup ef­fect.

You might ex­pect the do­mes­tic econ­omy to see a ben­e­fit from in­creased tourism and in­fra­struc­ture spend as well as a higher profile from be­ing as­so­ci­ated with the tour­na­ment, par­tic­u­larly for smaller na­tions.

How­ever, Europe’s largest econ­omy Germany had the most out­per­for­mance in the run up to and after­math of its host­ing of the World Cup in 2006.

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Source: SharePad, Thom­son Reuters Datas­tream

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