Investing in an Alternative Sector: Publicly Traded Professional Sports Teams

As investors, we're always looking to diversify across various industries and markets, especially internationally. And, this post is a result of combining two of my passions: investing and sports. In particular, I'm talking about investing in publicly traded football (soccer) teams. Now, I've probably lost my audience already haha, seeing how soccer is not exactly the most popular sport in America. But bear with me! Its the most popular sport practically everywhere else in the world. And, especially in the UK. So, we can capitalize on that.

First, let me address the rising secular trend in this segment that I have noticed over the years: increasing foreign ownership. Specifically, in the Barclays English Premier League (England's top football/soccer division), numerous American and various other foreign owners have taken clubs private. Previously, many of these teams were actually traded on public exchanges. Today, there are only a handful left that trade on exchanges. Football clubs that have been taken private by American owners include: Manchester United by Malcolm Glazer (he also owns the Tampa Bay Buccaneers), Aston Villa by Randy Lerner (he also owns the Cleveland Browns), Liverpool by Tom Hicks & George Gillett (Hicks is the American and he owns the Texas Rangers and Dallas Stars). Additionally, you've got Stan Kroenke who has slowly but surely been building up a stake in already privately held Arsenal (he also owns the Denver Nuggets, Colorado Avalanche, and US soccer team Colorado Rapids, among other things). And, this is just covering the American owners side of things. Recent developments have seen numerous other nations trying to get involved, including Dubai International Capital (DIC), who are trying to acquire Liverpool from either Hicks or Gillett. And, a few years back, billionaire Roman Abramovich bought out Chelsea and took them private. There are even more, but those are the major ones I wanted to touch on. The point is that there are only 20 teams allowed to compete in this prestigious league, and I'm fairly confident all the rest of them will be bought out over the years.

Basically, the trend here is increasing foreign ownership of English Premier League teams. And, with only a few publicly traded teams left, now is the time to act. The main investment thesis here would be to buy a stake in a successful Premier League team on public exchanges and hope it receives a bid to be taken private, thus allowing your shares to appreciate in anticipation of this bid, or outright selling your shares to the new hopeful private owners. Now, this presents a problem in that you don't want to be investing in something *solely* with the hope of a buyout. So, there's got to be another reason to own the stock. And, luckily we've found one: team performance. These club's shares typically trade on team performance and club happenings (signings, player transfers, etc). While financials obviously still matter, these stocks trade differently than typical equities. So, the investment thesis here is more macro in nature as you seek to capitalize on increasing interest in the Barclays Premier League by investors wishing to take sole ownership of the club. But, at the same time, you will need to invest in a team who realistically has a shot of performing well in the league. And, this is where my sports passion/knowledge comes in.

By following the Premier League for years now, I've been able to really get a feel for the league in terms of successful clubs vs unsuccessful clubs. I've used this knowledge as my research in order to highlight potential investing opportunities. Again, this is mainly an event driven pick based on a rising secular trend. The caveat here is that you could be waiting a long while for the catalyst to occur. However, the trend seems to be slowly building up as investors realize the investment potential in the English Premier League. Tune in tomorrow morning for the follow-up post presenting an investment idea. Click here for the follow up post.