Can investors enjoy a World Cup boost?
We examine the potential winners and losers as kick-off approaches
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.