Finding the back of the net for best football club investments
MILLIONS DREAM of their football team scoring at key moments but could consider such support off the pitch in their portfolio. If it was not for coronavirus, UEFA Euro 2020 should have kicked off to excited fans in Rome next week.
It may surprise many supporters that investments can be made not only in top football clubs but in the merchandise that depends on the sport. Play may have been suspended or will open without crowds but this could be the time to gain a discounted financial foothold.
Jason Hollands, from Tilney Investment Management, said: “Most clubs are owned by wealthy individuals as trophy assets and so the listed opportunities are relatively narrow.”
Investments do not have to be made directly. Top fund picker, Nick Train, is a football supporter. He holds both Celtic and Manchester United out of just 26 securities in the Lindsell Train UK Equity, which is known for its consistently outstanding performance, returning 323.8 per cent since launch in July 2006 by comparison with the FTSE All-Share Index of 79.5 per cent.
Football fans are loyal, creating a global supporter base with large, predictable audiences which in turn help to monetise advertising.
Whenever a global sports franchise has changed hands over the last decade, it has been sold for a higher valuation. Train says: “The bull market in sports franchises is one of the most obvious trends in the world today. Look for instance at the stake taken by the owners of Manchester City in 2019, which placed the highest value yet on a football club.”
Manchester City was founded in 1880, changing to its current name in 1894. Sheikh Mansour of the Abu Dhabi royal family purchased the club for £210m in 2008 and his sale of just over 10 per cent to Silver Lake Partners last November values the club at £3.7bn.
Manchester United started as the Carriage and Wagon Department of the Lancashire and Yorkshire Railway in 1878. In 1902, ‘The Red Devils’ took its current name. The club has won more trophies than any other in English football and is quoted on the New York Stock Exchange. Its class A shares have risen 26.6 per cent in five years.
Roy Kaitcer, investment manager at wealth manager Redmayne Bentley, says that Manchester United has attracted “many major sponsors such as
Chevrolet, Aon, Aeroflot and Apollo tyres”.
Will Ryder, equity analyst at discount broker Hargreaves Lansdown, says European football has a global fan base that “no other entertainment franchise can hold a candle to”. He notes the rapidly growing revenue, such as £396m in 2015 to £627m in 2019 for Manchester United.
The top return for a quoted club over five years is Teteks, founded in 1953, up 457.8 per cent and by an impressive 539.4 per cent over a decade. It is based in Tetovo in Macedonia. However, it is listed on the country’s exchange which few brokers handle here.
Over a decade, the best return was with Borussia Dortmund with 702.3 per cent. Valued at 377.1m euros in Deloitte’s annual survey of football clubs, it is second in Germany only to Bayern Munich (660.1m euros).
Portugal is home to several highly successful quoted football clubs. Over five years, Porto and Braga, both in the north, have returned 56.5 per cent and 135 per cent. The two rivals from the country’s capital have also proved profitable: Sport Lisboa e Benfica and Sporting Clube de Portugal. Over five years, they are up 183.2 per cent and 107 per cent respectively.
Celtic is the only UK club regularly traded in London. It was founded in 1887 to alleviate poverty among the immigrant Irish community of east Glasgow. Today it has £83.4m revenue with pre-tax profits of £11.3m and gained on the sale of players last year by £17.7m, up from £16.5m in 2018. Its shares have returned over 158 per cent in 10 years.
Technically, Arsenal is listed but on the NEX Exchange, which is a specialist market. The club has seen very little dealing. Only 62,217 shares have been issued with a single one quoted around £30,000 two years ago.
Italy is home to several star football clubs. Brokers in the UK can easily purchase on the Borsa Italia but check the dealing and any other charges.
Two clubs are based in the capital: Societe Sportiva Lazio and AS Roma, nicknamed The Eagles and The Magic One respectively. Juventus, known as The Old Lady perhaps because after Genoa it is Italy’s oldest club, is located in Turin. Over a decade, their returns have been markedly different: 421.5, 16.0 and 213.2 per cent.
Denmark lists several possibilities. From 1880 AGF was originally a club for gymnastics and fencing but added football in 1902. It has returned over 85 per cent in five years.
Parken is the holding name for FC Copenhagen and is up over 90 per cent over the same period. Silkeborg was founded in 1917 and today has better returns with 152.7 per cent in five years and almost 40 per cent over a decade.
Companies which provide football-related products and services can also be very profitable.
“Audiences watching live sports are very valuable,” says Darius McDermott, of Chelsea Financial Services, a keen Chelsea supporter who attends almost every match.
Nike (US), Adidas (Germany) and to a lesser extent Under Armour (US) are leading kit sponsors and suppliers whilst JD Sports has successful sports fashion which involve marketing deals with premier league footballers.
Patronus Partners, a stockbroker and investment manager, likes Nike in the health and fitness sector.
In the English Premier League, Nike sponsors Chelsea and Spurs and, from next season, Liverpool. Jonathan Patrick, at Patronus, says: “Strong innovation means Nike can offer each football team it sponsors highly differentiated kit to match their distinctive culture and performance needs.”
It accounts for $2bn of wholesale revenue.
McDermott’s research has unveiled several collectives with key football merchandise:
■ Artemis US Extended Alpha: Nike
■ European Opportunities Trust: Adidas
■ Janus Henderson European Focus: Adidas
■ Legg Mason IF Martin Currie European Unconstrained: Adidas
■ Threadneedle European Select: Adidas.
There are firms with football brands in their range. Electronic Arts, which was founded in California in 1982, makes the FIFA game.
It trades as EA and is one of the top 10 holdings out of 33 in total in the Brown Advisory Global Leaders fund.
The Philadelphia-based telecommunications conglomerate owns Sky as well as NBCUniversal and Xfinity. It is one of the selections within Artemis US Extended Alpha, a fund which has increased by 114.4 per cent in five years.
Bookmakers benefit from football.
Consider Flutter Entertainment which is the merger of Betfair and Paddy Power to which The Stars Group has been added. The shares form part of the portfolio of GAM Star Continental European Equity, which is up 38.5 per cent in five years.