Valuation disparities between US and European sports teams mean Nick Train still sees plenty of room for further stock wins as his stakes in football clubs and sports franchises soar during August.
Lindsell Train Global Equity fund holding Juventus was up 40% over the month ahead of Train’s holding in Manchester United, which is in the Lindsell Train Investment Trust and climbed 27% over the same period.
This week, Manchester United was ousted from the League Cup by Derby County. But Train has previously said the brand and its revenues could survive poor performance.
Bull market for sports teams
“Sports and entertainment assets remain in a bull market,” Train said in his August factsheet for the Lindsell Train Investment Trust, which mentioned holdings in other funds too.
Trust Celtic delivered 22% growth in the investment trust, while World Wrestling Entertainment in the global fund returned 10%. WWE has trebled in price over 2018, Train noted.
“That which attracts eyeballs to screens is going up in value.”
Manchester United is held across his portfolios and was the last addition made to the Finsbury Growth & Income Trust when he bought a stake in summer 2017. He hadn’t added a new name to the portfolio for two years.
Sports franchises protect against digital disruption
Manchester United and other sports franchises in the Lindsell Train portfolios are part of Train’s focus on disruption, which he has previously said will shake up the relationship between growth and value stocks.
Earlier this year, Train said he wanted to increase his portfolios’ stake in Manchester United from 1.5% to 2.5% before the stock trebles.
“There is going to be the mother of battles between today’s global internet giants to ensure eyeballs are attracted to their devices, their streaming service, their app, and not their rivals’,” he said at a seminar in May.
“This battle is going to make the battle that Sky fought with ITV or the BBC back in 1990s look like a playground tiff. There are trillions of dollars of market cap hanging on which streaming service, which app dominates. The value of the content that draws in million of eyeballs is just going to carry on going up.”
Manchester United also had trophy value, he added.
Disparity between US and UK sport franchises
The sale of the Houston Rockets in September 2017 provided a basis for why Manchester United could treble in value, Train said at the Frostrow Capital seminar.
US businessman Leslie Alexander sold the basketball team for $2.2bn after buying it in 1993 for $85m.
Train said: “The Houston Rockets, which after all is a parochial US franchise, sold at 9x sales. When we started holding Manchester United last summer we were buying it on 3x sales. There’s this massive disparity between an observed transaction for a franchise that when all is said and done is not of the same calibre.”
Player pay and performance don’t matter
Train was unfussed by “grotesque” salaries commanded by football players. Pay will continue to soar but is not out of line with other sectors dependent on talent, such as investment banking or law, he said.
Manchester United revenues could survive poor performance due to its strong brand, he added, noting the team had been around since before General Electric, generally considered the oldest company in the Dow Jones.
The Boston Red Sox baseball team failed to win a World Series for almost 100 years before 2004, he said. “That didn’t affect the value of the franchise,” he said.
“It’s important that Manchester United is competing in Europe. It’s important that there’s an international audience. If it were to be relegated for more than a couple of seasons, that would be damaging.”
